UK lender Perenna to offer 50-year fixed mortgage

Mortgages: Perenna could offer rates of 4% to 4.5% on 30-50 year loans. Photo: Matt Dunham/AP

A new lender has been licensed by UK regulators to offer fixed rate mortgages for up to 50 years.

Perenna, which is based in the UK, initially plans to provide home loans that lock in rates for 30 years before introducing options that last even longer.

Banks generally offer fixed rate mortgages for up to 10 years.

Perenna’s products will be available to borrowers ranging from first-time buyers, who can access 95% loan-to-value (LTV) products, to those looking to relocate, mortgage or take out a mortgage later in life.

The loan-to-value ratio (LTV) is an assessment of loan risk that financial institutions and other lenders look at before approving a mortgage loan. Generally, loan valuations with high LTV ratios are considered higher risk loans. Therefore, if the mortgage is approved, the loan has a higher interest rate.

Read more: Interest rate: first-time buyers must pay 40% of their salary in mortgage payments

Arjan Verbeek, CEO and Founder of Perenna, said: “It is very exciting to be a licensed bank with restrictions, and this is a major milestone for the team. Britain’s financial infrastructure requires significant innovation to boost growth and reduce inequality. Perenna will be the model to achieve this, for mortgages as well as for SMEs and infrastructure.

“Perenna will help consumers buy their first home, relocate, support themselves in retirement and ease the transition to net zero emissions. Perenna looks forward to working with other initiatives to increase private sector investment in the real economy by addressing the structural challenges we face.”

Perenna could offer rates of 4% to 4.5% on loans of 30 to 50 years. This would be affected by gilt returns at launch.

Unlike banks, which fund a large portion of their mortgages with customer deposits, Perenna will issue covered bonds to pension funds and insurers for longer-term funding.

His approval comes as the Bank of England hikes interest rates in an attempt to tackle rapid inflation, which has hit a 40-year high of 9.4% in the UK.

Read more: UK house prices fall in August as housing market cools in summer

Home asking prices fell for the first time this year, but remain high. The typical asking price fell 1.3% between July and August to £365,173, according to property website Rightmove (RMV.L).

Outgoing Prime Minister last month Boris Johnson saw ultra-long mortgages as a way to increase home ownership in the UK. More flexible mortgages are increasingly seen as one of the most practical ways to increase home ownership among young people.

Watch: Will UK house prices ever drop?

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