Our latest research sheds light on the prevalent financial anxieties among over-55s regarding mortgage affordability and accessibility. With over a quarter (28%) expressing concerns about affording their mortgage if it transitions to their lender’s Standard Variable Rate (SVR), and an additional 36% anticipating difficulties in managing repayments, addressing these worries is paramount. 

Many older borrowers are contemplating selling or downsizing their homes to mitigate financial challenges, with 37% considering such options and nearly half (48%) in London exploring relocation or downsizing due to soaring property prices. 

Traditionally lenders’ age limit restrictions pose significant challenges for older borrowers seeking new mortgages or remortgages, as highlighted by concerns from nearly two-thirds (60%) of respondents regarding the lack of tailored financial products. Thirty-six percent feel excluded from the market due to age restrictions, emphasising the need for more inclusive solutions. 

Our Retirement Interest Only (RIO) mortgage for those aged over 50 aims to address these concerns by offering flexibility and optionality. As of 4th February 2024, it stands as a market leading long-term fixed-rate RIO product, starting at 5.84% (up to a maximum 60% LTV). This product provides the security of fixed payments, ensuring homeowners can enjoy retirement with peace of mind. 

Arjan Verbeek, CEO and co-founder of Perenna, emphasised the importance of inclusivity in the mortgage market, particularly for older demographics. He stated, “The current UK mortgage market is ageist. A whole demographic is being unfairly excluded and left behind, because of their age. We think that is wrong.” 

The lack of options for people over 55, compounded by fears of being trapped in their provider’s SVR, is a significant concern. Verbeek continued, “Retirees should have solutions available to live the lives they desire and deserve. Our new long-term fixed-rate retirement interest-only mortgage is a step towards financial freedom for older homeowners.” 

Check out our latest product range for current rates.  

Notes 

• All data, unless otherwise specified, is taken from 1,003 respondents conducted by Censuswide in January 2024 – all respondents were homeowners aged 55+ and either heading into retirement or already retired. 
• Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles. 
• “Market leading” – determined by lowest fixed for life retirement interest only product on the market as at 04 February 2024 https://www.equityreleasesupermarket.com/compare-deals/retirement-interest-only 
• End of term age limit – this refers to the age by which the borrower has repaid their mortgage. 

Correct at time of publishing.

One of the biggest reasons for cases to stall after placement with lenders was down to old ‘affordability’. With high house prices and rates at current levels, even stretching out terms to near 40 years still doesn’t seem to be helping. But why is this? Simply put, it is because many lenders are still basing affordability on SVR’s + a margin. At the time of writing this, those and SVR’s are around the 8% mark.  

At such elevated levels it really is the few and not the masses that can afford their homes. Switching lenders may not be possible, and borrowing the right amount for that dream house may not be achievable. Ultimately this is stalling the market and leading to lower transactional levels. In fact, remortgages are at their lowest levels since 1999!* 

We have seen lenders reprice down over recent weeks, which is really great news as this will reduce your clients’ monthly payments. However Base Rate remains unchanged and many lenders base affordability on the SVR which is typically 3% above this.  

The question is why do so many lenders still do this? The requirement to stress at 3% over Base Rate disappeared when the Bank of England (BOE) affordability tests were scrapped in favour of MCOB rules which ensure rises of 1% or 100 basis points are affordable over the first 5 years. 

Are lenders being overly prudent? Is there a belief that interest rates could rise further? With inflation somewhat under control (we, for one, are keeping our fingers crossed), all things look a lot more positive. A fact that appears to be backed up by the decreasing SONIA swaps. So, given this, will we see SVRs come down? 

My view is yes and no. We may see some lenders reduce their SVR margin (squeeze down that typical 3% cushion) or instead, they may simply leave the SVR alone and introduce a new method for new lending. Of course, we could wait for BOE to reduce base rate, but that could be a while! 

It does seem like some change is in the air though. Santander, in an attempt to assist new borrowers, has moved away from stressing on SVRs and has now implemented a ‘managed rate’ which is lower than their SVR. This allows them to move as they see fit, rather than when the BOE move rates. This is an interesting move and I think other lenders will be watching keenly from the sidelines.  

The great thing about this is that more cases should, in theory, ‘fit’ and the loan amount you requested should hopefully work! But this is just one lender and it’s not a huge decrease, so perhaps we shouldn’t get carried away just yet. 

There is another option though, one that moves away from SVRs, managed rates and fingers in the air methods… and that is affordability based on payrate. This is typically only available when clients take out deals of 5 years or more. The good thing here is that a payrate of say 5.5% will of course give a lot more borrowing power and affordability breathing space when compared to both an SVR and a managed rate model. 

At Perenna, we are able to give clients great borrowing power and affordability. Our long-term fixed rates (20 to 40 years) remove all rate gambles and allow lending up to 6 x income subject to criteria.  And, importantly, affordability is based on payrates. 

Longer term fixed rates may be an alien concept in the UK, but are commonplace in other well-established markets like America, Australia and many European countries. The reason long-term fixed rates haven’t necessarily worked previously is likely down to a lack of flexibility, long and expensive ERCs and the absence of recurring income (proc fees) for those who recommend them.  

That’s where we come in. Our offer addresses all these shortcomings. With a Perenna mortgage, your client can fix their monthly payments for up to 40 years with the ability to port or borrow more. The ERC is only 5 years and there’s trail commission for you when you review your customers’ needs. Your client can even PT onto a lower rate at the end of the 5-year period if rates come down! 

Winning over brokers and changing hearts and minds to a more European concept may take some time. The positioning of long-term fixed rates with clients will be key. If presented as a standard 35-year fixed rate, borrowers may be hesitant. Personally, we may not know what will happen in 3 or so weeks’ time, let alone in 35 years! However, positioning it as a mortgage that provides long-term stability with a short 5-year tie-in makes it significantly different. It offers certainty with flexibility. Who wouldn’t want a mortgage that allows you to stay on if rates go up but provides the option to switch to a lower deal if they go down? It’s akin to having a ‘get out of jail free’ card in Monopoly! 

Some other news that may be received with mixed feeling is terms of up to 50 years, on one hand the amount of interest paid will be high, however by taking a long term like this, young first-time buyers could achieve the dream of home ownership instead of a life in rented. Could 50 years be the new 25 in years to come? One to watch… 

I’m sure 2024 will have lots of changes and plenty of surprises in store! 

Tim Sorrell, National Account Manager 

*source@ Remortgaging falls to lowest level since January 1999 – Mortgage Solutions

Correct at time of publishing.

The 2023 mortgage market closes once again with affordability being one of its biggest challenges. This has been a consistent theme for many years irrespective of the economic backdrop or whatever else may be going on in the world.  

The mortgage trade press in December 2023 reports some notable headlines in relation to affordability including, ‘FTB sizing down to step onto property ladder’ and ‘Searches for marathon mortgages top 70% in 2023’. If anything calls for an alternative approach to affordability these headlines are it!  

At Perenna, our alternative approach means that we can and will get more borrowers who want to own a home and can afford it, onto the property ladder. 

Our funding model, which does not rely on retail deposits, is more akin to the tried and tested model across Europe and the USA, using long-term covered bonds as the mechanism. Given the long-term fixed nature of the proposition Perenna has no SVR or ‘revert’ rate (and therefore no SVR based stress test)! This means we can unlock higher LTIs for those who need it, whilst giving the flexibility of short ERC period (5 years). 

If you team this with the fact that ‘age is just a number’, it works for all consumers at any stage in their homebuying journey. At Perenna, we have no maximum age limits which would restrict term and therefore affordability, working in support of the current priories of the consumers mortgage requirements, whatever they may be.  

Certainty, stability, and no payment shocks complimented by 6 x income (subject to criteria of course) and our alternative approach to affordability means we can offer some of the, if not the ‘highest affordability’* in the market.  

Brokers remain at the forefront of what we do, and for this reason Perenna pay a ‘trail commission’ on our long-term fixed rates.   

And there’s more to come. At Perenna, we’re always looking for ways to help borrowers. So watch this space!   

Deborah Reeves, National Account Manager 

*Perenna launches “highest affordability” mortgage in the market to first-time buyers  | Perenna Brokers 

Correct at time of publishing.

In the UK, there aren’t many longer-term fixed rates out there. We’re changing that with the Perenna mortgage.

Like with anything new, we know it can take time to feel comfortable with a new offering. We appreciate that not everyone fully understands how long-term fixed rates can benefit them. So, we think it’s time to shine a light on some of the myths we’ve come across and show how Perenna’s innovative product can address these for your customers.  Here are just some of the comments we’ve come across…

Myth: They’re not flexible

We say:

Typically, longer term fixed rates offered in the UK have not given borrowers the flexibility they may want. Ten-year fixed rates may come with long early repayment charges which can restrict borrowers.

However, a Perenna mortgage is different. Our product combines long term stability with flexibility. Your customer will know exactly what they must pay each month for the whole mortgage term. No teaser rates, no rising payments, no shocks.

Plus, our mortgages are designed to fit around their life. That’s why they can take their mortgage with them when they move home or change mortgage to another lender or product without charge, after 5 years.

Myth: Not many people are interested

We say:

Thousands of people on our waitlist have shown that they are interested. Plus, millions of people across US and Europe already benefit from products like this. So, why shouldn’t these mortgages work in the UK? Our mortgages have been designed to help:

• first-time buyers looking to borrow a little bit more
• homeowners seeking stability when remortgaging
• later life borrowers wanting to release equity from their property

Myth: They’re expensive

We say:

You can’t compare apples and oranges.

Whilst a Perenna mortgage may have a higher rate than some other ‘teaser’ rates on offer, you need to think about how they may compare longer term. For example, if your customer is  thinking about fixing their rate over a short term, they’ll need to consider what happens when that deal comes to an end. Will they be able to afford a new mortgage if rates rise or their circumstances change? We want to remove this risk.

We don’t think homeowners should have to worry about rates changing or being denied access to mortgage products in the future. That’s where a Perenna mortgage comes in. By fixing their rate for the full mortgage term, they’ll know exactly what they must pay each month for the whole mortgage. Can you put a price on peace of mind?

Myth: Rates will come down so no need to fix for longer

We say:

Everyone loves a good deal. But is it wise to hazard a guess on what could be your biggest financial decision? Instead of trying to predict the future, your customer will know exactly what they’ll pay each month with a Perenna mortgage. This puts them back in control of their finances so that they can plan for their future.

Yes, rates could come down, or their circumstances could change. And that’s why our product comes with flexibility as standard. If they want to change, that’s no problem. They can do so without charge after 5 years.

Find out more about our mortgages?

Want to find out if Perenna could help your customers? Why not use our calculator to find out how much they could borrow? Or get in touch with the team to find out more.

Correct at time of publishing.

Growing older is part of life.  And often, with age, financial security becomes more important than ever.

For many of us, owning a home is a huge part of that security. And for most people, that means getting a mortgage.

However, as retirement approaches, homeowners in the UK may find themselves in a tricky situation if they want access to a mortgage. Often the options on offer to them are limited.

You may have experienced customers who aren’t able to shop around or get a mortgage at all, simply due to their age.  Retirement should be a time to relax and enjoy life away from the pressures of the daily grind. And yet, many may find people themselves worrying about their home.

So why can having a mortgage in later life be important?

There are many reasons why people want a mortgage into retirement. It could be to support their lifestyle or to pay for home improvements. Or for some, it’s simply to allow them to stay in the home they love.

Here are a few examples to bring this to life.

Example 2

John and Beth want to pay down their debt as soon as possible.

John, 54, and Beth, 52 are on an interest only mortgage, with no repayment plan. Their joint income is £80k.

They don’t want to downsize as they love their property and location. They are looking at a capital & interest repayment product. They would like to keep their monthly payments low.

Example 3

Melanie has recently separated from her partner and needs a mortgage that helps her meet affordability requirements.

Melanie is 56. She is a nurse with an income of £45k.

Her priority is to remove her partner from the mortgage and avoid having to sell the family home and downsize.

As the mortgage will rely on her income alone, affordability as well as end of term age limits are stumbling blocks for her.

How can Perenna help?

Here at Perenna, we want to help homeowners make the most of their retirement. And for us, age is just a number. That’s why we’ve removed age limits. Instead, we assess mortgage applications on property value and whether the monthly payments are affordable (maximum loan to value limits may apply). This could make a huge difference for each of the examples above. It could be the difference between your customer achieving their goals and not.

Want to find out if Perenna could help your customers? Why not use our calculator to find out how much they could borrow? Or get in touch with the team to find out more.

Correct at time of publishing.

Growing older… the one thing we cannot stop

People are living longer, working longer and retiring later. This is a trend that has been gathering pace over recent years, but (dare I say it), the mortgage market has not kept up!

If you think about a typical 1930’s house, it is very compartmentalised. There is a separate kitchen, dining room and living space. Fit for purpose perhaps, but nevertheless has fallen out of favour.  In recent times, we have seen a switch to more open plan arrangements where you can be together whilst cooking, eating and doing homework. In short, the structure of our houses has moved with our lifestyles.

Could the same be said about our later life mortgage market? It works, but perhaps it’s time for an upgrade? Maybe now is the time to bring the market in line with how we want to live?

There was lots of talk in the industry from 2010 onwards about later life lending which in turn lead to RIOs (retirement interest only mortgages). The idea was that RIOs would assist and give greater choice to the consumer – and to a degree this worked… A move from costly equity release (which was perhaps the only option via a Lifetime mortgage) to interest only, which instead protected equity and inheritance for families.

But does this do enough? Is more innovation needed?

Some could argue that not all people want interest only and this in itself is a more expensive option compared to a repayment mortgage where the capital (not just interest) is being reduced.

Repayment (which may be preferred if available) is usually the better option, however, it comes with lender concerns over long term affordability. Especially with lenders stress testing, looking at maximum age & proof of income in a market where relatively short- term fixed rate products are the only option on offer.

A further change is needed. If we think about that 1930s house, it feels like there’s more work to be done, before it’s quite right for 2023 living.

So what’s the answer?

Perhaps a long-term fixed rate repayment mortgage, without reversion, would do the job.

A longer-term product where the monthly payment does not change for the life of the loan, providing stability and certainty.

And that’s where Perenna comes in. Perenna mortgages are financed through long term covered bonds rather than retail deposits. This allows Perenna to offer a longer-term option to borrowers. It means there’s now an option where homeowners needn’t worry about rates changing or being denied access to products as they approach retirement. The short ERC of 5 years provides flexibility too.

Why shouldn’t it be feasible to use a pension for monthly mortgage payments? This should be an individual choice. Surely a happy retirement means financial freedom and choice? Longer term options should not be out of reach where suitable for the individual. And with no age limits, Perenna’s approach supports this. It’s that extra step towards the open plan arrangements of the modern-day house!

This style of lending on a longer term fixed could certainly be used as an option to exit RIO/TIO. And thinking about cost, a longer term alternative should be more cost efficient than the current options of rolled up interest, or monthly interest only.

There is definitely a gap in the market and  it feels like there’s a need for more activity and competition in this space. After all, variety is the spice of life!

So, with consumer duty seeking better outcomes for borrowers, an alternative option in the later life lending space could certainly be something for consideration.  We’re keen to have that discussion with you, so why not get in touch. 

Correct at time of publishing.