Originate
The question a lender asks within a minute, and the answer
Markup is risk-banded from 1.2× to a 2.0× ceiling, and the band decides whether the facility funds itself. Over thirty years on a £280,000 property:
| Band | Monthly | Implied rate | Against 4.5% conventional | Funding |
|---|---|---|---|---|
| A · 1.2× | £933 | 1.25% | −£485/mo | Subsidised |
| C · 1.5× | £1,167 | 2.91% | −£252/mo | Subsidised |
| E · 1.8× | £1,400 | 4.39% | −£19/mo | Self-funding |
| F · 2.0× | £1,556 | 5.30% | +£137/mo | Self-funding |
That banding is what makes the structure defensible. At the standard 1.8× band the implied rate is roughly a conventional mortgage rate, so the markup covers cost of funds on its own. The 50% trading allocation subsidises the strongest borrowers rather than carrying the whole book — which is ordinary risk-based pricing, not an exotic dependency.
The residual risk is honest and worth stating: at bands A to D the trading return is load-bearing, so trading performance has to be underwritten and capitalised against. And at every band the borrower has a payment that cannot move for thirty years — no reversion rate, no base-rate exposure — which is a real transfer of interest-rate risk from the borrower onto the bank, and must be hedged accordingly.
What the borrower gets, against a conventional mortgage
Early settlement, and why a value drop does not matter
Test it
Why the drop does not trigger anything
There is no loan-to-value covenant to breach, because the facility was never priced as a percentage. Two independent valuations set the figure once, at origination, and it is never re-tested. The borrower keeps paying the same amount, keeps burning tokens, and keeps building equity through a downturn rather than being trapped by one.
Early settlement charges markup earned to date, not the full term. The unearned portion is waived — the same rebate principle Islamic finance uses. Without that waiver a borrower settling in year five would owe the whole markup and the structure would be punitive at exactly the moment people need to move. With it, they hold real equity from early on.
Which leaves non-payment as the only genuine risk. That is a credit and affordability question, and it is the one the underwriting has to answer — not the valuation.
The deposit as a buffer, not as equity
Model it
Why this is better for both sides than a conventional deposit
For the borrower. A conventional deposit buys equity you cannot reach. Lose your job and that equity is irrelevant — you still miss payments and the lender still starts proceedings. Here the same money is months of cover, drawn automatically, without asking for permission at the worst possible moment.
For the bank. Net exposure is the price less the buffer — on a 10% deposit that is 90% of value, lower than a conventional 100% mortgage, while the borrower is still fully financed. The buffer also removes the most common cause of default: a temporary income gap. Arrears usually begin with two or three missed payments, not with an inability to ever pay again.
The policy this supports: do not foreclose unless it is genuinely unavoidable. A buffer makes that a workable rule rather than a good intention, because there is a defined mechanism to fall back on instead of a case-by-case negotiation under pressure.
Two things to decide before this is offered
Whose money is the buffer? If it is held on the borrower's behalf it is a client deposit — protected in insolvency, returnable if they sell, and probably requiring safeguarding permissions. If it is a prepayment to the bank, the bank keeps it on default and the borrower has effectively lost their deposit. Those are very different products and a reviewer will ask which one this is.
What happens when the buffer runs out? The buffer converts a liquidity problem into time. It does not solve an income problem that never recovers. There still has to be a documented path after the last covered month — term extension, part payment, assisted sale — and "we prefer not to foreclose" is a motto, not a procedure.
When someone cannot pay
| Stage | What happens | What the borrower keeps |
|---|---|---|
| Buffer draws automatically | The escrow pays the monthly amount. No application, no forbearance request, no conversation at the worst possible moment. The loan account shows the buffer reducing and the equity already credited. | Everything. The buffer is their money and it was already counted as equity. |
| Runway is visible | The app shows months of cover remaining, counting down. The borrower knows exactly how long they have to find work — rather than discovering their position from an arrears letter. | Everything, plus time and information. |
| Buffer nears exhaustion | Contact begins before the last covered month, not after a default. Options: extend the term, reduce payments against a longer runway, or agree to market the property. | Everything paid to date, as equity. |
| Assisted sale, if it comes to it | The borrower markets the property themselves, at market pace. Not a repossession, not a forced auction. The bank is repaid from the proceeds. | All equity built, plus any unused buffer, plus any appreciation. No default recorded. |
| Foreclosure | Only where the borrower will not engage at all, or the property cannot be marketed. It is the failure case, not the process. | Equity still returned after the facility is settled. |
Why this is not just a softer version of forbearance
Conventional forbearance is discretionary, applied for, granted late, and recorded. This is pre-funded and automatic — the money is already there, in the borrower's name, and it draws without anyone deciding. The difference matters most in the first three months of trouble, which is when conventional arrears become unrecoverable.
It also changes what a missed payment is. With a buffer in place there is no missed payment to report, so a temporary income gap does not become a permanent credit record.
The floor guarantee — and what it costs the bank
The buffer is held in ASC, so it tracks gold. Over a long horizon that very likely preserves value better than sterling. But an emergency reserve is drawn exactly when the borrower is in trouble, and that timing is not theirs to choose — on gold's 52-week range the same deposit would have been worth between 16.6 and 24.6 months of cover. Losing your job in a bad month for gold should not also shorten your runway.
So the floor is guaranteed in months, not in value. Months of cover are locked at what the borrower actually contributed. If gold is down at drawdown the bank tops up the difference; if gold is up, the borrower keeps every penny of the upside. Use the gold control to the left to see it hold.
What that costs, stated plainly: it is a put option on gold that the bank writes, struck at contribution value, per borrower. It only pays out when two things coincide — a borrower in hardship and gold below its origination level. At the 52-week low that is roughly £3,900 per drawing borrower. Across a book where perhaps 3% are drawing in a given year with gold 17% down, the cost is around 0.5% of the buffer pool. Small and boundable — but it must be provisioned for rather than assumed away, hedged once the pool is large, and disclosed, because the bank is writing an option.
What this page is, and isn't
What's real here
The arithmetic is real and recomputes as you change the inputs: markup, monthly payment, total repayable, loan-to-value, the implied annual rate, and the comparison against conventional mortgages at current rates. The tokenisation, valuation binding and disbursement each commit a genuine SHA-256 hash-chained entry, and the base-33 round-trip check runs on every amount. The repayment split is applied as described. Terms are fixed at origination and there is no mechanism in the model to vary them afterwards, which is the structural point of the product.
What this is not
Not a lending offer, not an illustration under any consumer credit regime, and not a product that could be sold today — mortgage lending requires permissions Meridian does not hold in any jurisdiction. No credit assessment, affordability check, source-of-funds verification or legal charge over the property is modelled; a real origination is mostly those things. The valuation reports are demonstration records, not surveys. The trading returns that fund the structure are assumed, not evidenced, and a book of thirty-year commitments funded by trading performance is a materially different risk profile from a conventional mortgage book. That risk is stated above rather than buried here.