New UK Mortgage Lender Perenna Introduces 30-Year Fixed-Rate Mortgage Options
Perenna, a new UK mortgage lender, is unveiling a unique offering that allows borrowers to lock in their mortgage interest rate for up to 30 years, providing stability in a market characterised by fluctuating interest rates. The startup has received full approval from the UK's primary financial regulators and aims to provide borrowers with certainty and relief from the uncertainties of fluctuating mortgage costs.
The traditional UK mortgage market is primarily dominated by short-term fixed-rate products lasting between two to five years, while Perenna is offering borrowers the option to secure their mortgage rate for 20 or 30 years, ensuring consistent interest payments throughout the term.
Perenna is in the process of finalising its pricing, but the rates for its deals are estimated to fall between 6.5% and 7.5%, a range the company believes is comparable to current two-year fixed-rate offerings. The average rate on a new two-year fixed deal was 6.67% according to Moneyfacts, with some best-buy two-year deals available at approximately 5.6%.
In a market where mortgage lenders are competing through fixed-rate pricing, Perenna emphasises that its deals provide both security and flexibility. Unlike some rivals, Perenna allows borrowers to switch to other lenders without incurring a penalty after just a few years. On a 30-year deal, any early repayment charges would apply for five years.
One distinct advantage of Perenna's long-term fixed-rate deals is the ability to borrow more money due to the absence of the risk of rising repayments. The lender intends to enable some borrowers to access mortgages of up to six times their annual salary, a noteworthy increase from the typical maximum of four-and-a-half times annual income.
While other UK lenders, such as Kensington, offer extended fixed-rate terms, Perenna's proposition stands out due to its flexibility in allowing borrowers to explore other options without enduring significant penalties. This innovation aims to address the potential apprehension of borrowers committing to a lengthy fixed-rate term.
Perenna asserts that its approach counters the vulnerabilities of variable and short-term fixed-rate deals, which can expose mortgaged households to rising interest rates. The lender also aims to support first-time buyers in their pursuit of homeownership, particularly in a challenging housing market.
Initially, Perenna plans to offer its mortgages to the more than 5,000 individuals on its waiting list in the coming weeks, with a wider public launch expected later this year, likely in October or November.
Perenna's funding model relies on issuing covered bonds to investors seeking long-term stable income sources, such as pension funds and insurance companies. This approach allows the lender to operate without the constraints associated with traditional lenders reliant on short-term deposits.