Perenna has received approval from the Prudential Regulation Authority and Financial Conduct Authority, enabling it to launch long-term fixed rate mortgage products in the UK.
The move comes as a response to the UK market’s dominance by variable and short-term fixed rates, which leaves households exposed to rising interest rates.
According to Perenna, over a million UK households could face an increase of more than £500 in their monthly mortgage costs by 2026.
The company’s funding model involves issuing covered bonds to investors like pension funds and insurance companies. This allows Perenna to create products for first-time buyers, second steppers and later life homeowners.
Arjan Verbeek, CEO and co-founder of Perenna, said: “We’re introducing much-needed structural change to the UK. In other countries, billions of pounds of pension savings are channelled into the real economy using covered bonds.
“Together, our unique funding model and banking licence will enable us to do exactly the same in the UK and unlock the housing market, an important part of GDP.”
Colin Bell, COO and co-founder, added: “Our mission is to create a nation of happy homeowners. We’re excited to offer our flexible products to consumers who, for too long, have been left underserved.”
Perenna will initially offer its mortgages to eligible borrowers on its waiting list.
Nick Mendes, mortgage technical manager at John Charcol, said: “Perenna’s proposition has been mentioned on numerous occasions, a lender that can offer a long-term fixed rate mortgage without the excessive ERCs. After months of speculation, it looks like we could finally see Perenna in action.
“Perenna will offer homeowners a fixed rate for 30-years with an early repayment charge of up to 5-years, a product which is unrivalled by any other longer-term fixed rate competitors. Previously the issues with longer-term fixed rates were the limitations and potential costs when it comes to porting or redeeming the mortgage.
“On a 30-year fixed Perenna will allow a client to borrow 5 – 6x their income. In a period when lenders are reducing a client’s maximum borrowing to factor in the cost of living, this income multiple calculation will allow more homeowners and first-time buyers to potentially get on the property ladder and/or offer them a level of stability and the flexibility they need.
“The only question will be how will they price their rates in the current market.”
