New lender’s 50-year fixed mortgage to beat inflation
MORTGAGES with 50-year fixed rates could soon be available to house buyers.
The radical new loans are designed to help borrowers onto the housing ladder.
UK-based lender Perenna, which has just been granted a licence for the products, initially plans to provide home loans that lock in rates for 30 years.
But it says it will then roll out mortgages with even longer terms.
Its approval comes after the Bank of England raised interest rates in an attempt to tackle growing inflation, which has reached a 40-year high of 9.4 per cent.
The Bank lifted rates by 0.5 per cent to 1.75 per cent this month and another 0.5 per cent increase is expected.
House prices last month hit a record high – though data from property site Rightmove on Monday showed the average value dipped 1.3 per cent in August to £365,173.
Perenna could give rates of 4 to 4.5 per cent on the 30-year to 50-year loans, though this would be affected by gilt yields at the time of launch, reports say.
Arjan Verbeek, Perenna CEO, said: “Rates are going up and, if you have a household budget to manage, you need to know what you are paying every month.
“Mortgages are broken in the UK. Normal people cannot buy a house. This is not the case in other markets, such as the US and Denmark, where stability is provided by long-term mortgages.”
Boris Johnson says he is “certainly” exploring plans for longer mortgages that could pass from parents to children. Such loans could help younger people get on to the housing ladder – with the concept of 50-year mortgages receiving the nod from the Bank.
While a number of lenders offer 25-year fixed rates, the maximum term on the market is currently 40 years.
Jonathan Rolande, of the National Association of Property Buyers, said: “It’s never a bad thing to give the right people more flexibility to borrow but this won’t help the millions struggling to raise a deposit or the people who don’t earn enough to buy their own home.”
Perenna’s licence will come into effect once it confirms to the regulators its infrastructure is in place.