The new lender has been granted a license by the UK financial regulator to offer mortgages at fixed interest rates of up to 50 years in a move aimed at helping borrowers manage surging inflation.
UK-based specialist lender Perenna plans to initially offer fixed-rate mortgages for 30 years before rolling out longer-term products.
That approval comes as the Bank of England raises interest rates to combat rapid inflation, which has hit a 40-year high of 9.4% in the UK.
Long-term mortgages are being explored as a way to help young people get mortgages as real estate prices remain high.
Prime Minister Boris Johnson considered the plan last month For longer mortgages Something that is passed down from generation to generation.
housing prices The average price in August fell 1.3% to £365,173, according to data from property site Rightmove on Monday.
Banks typically offer fixed-rate mortgages for up to 10 years, with the most popular products lasting two to five years, said Ray Bolger, senior manager at broker John Chercol.
Perenna could offer interest rates of 4 to 4.5% on 30 to 50 year loans, but this would be affected by the starting gold yield.
Perenna CEO and founder Arjan Verbeek said long-term interest rates should help borrowers in an environment of cost-of-living crisis and rising interest rates.
“Mortgage rates are rising, and if you have a household budget to manage, you need to know your monthly mortgage payments,” Verbeek said. “Inflation is high, so this relieves a lot of stress.
“Housing loan It’s broken in the UK because normal people can’t buy houses. This is not the case in other markets such as the US and Denmark, where long-term mortgages provide stability. “
Economist and former Johnson adviser Gerald Lyons wrote last week in a Think Tank Policy Exchange paper: Rental to Generation Buy”.
Unlike banks that fund much of their mortgage financing through customer deposits, Perenna issues covered bonds to pension funds and insurance companies for long-term financing.
Few financial institutions have signed such long-term mortgage contracts, with the longest fixed offer extending as long as 40 years. Last year, specialty lender Kensington launched a 40-year fixed-rate mortgage. Insurance company Rosssay.
Mr Bolger said: Players entering this market will obviously raise awareness and increase competition.
“The fact that Kensington uses annuities while Perenna uses covered bonds for funding is also a plus for market diversification.”
Perenna has raised around £35m from investors, including venture capital fund IAG Silverstripe, which was backing peer-to-peer lender Zopa.
Once the system build is complete, your banking license will be fully activated. The lender aims to launch its first product within six months. We also plan to work with Challenger Bank as a distribution partner to enable loans to be issued using our funding platform.