A new lender has been given a licence by UK regulators to offer mortgages with fixed rates of up to 50 years.
Perenna, which is based in the UK, is initially planning to provide home loans that lock in rates for 30 years before introducing options that last for even longer.
Banks typically provide mortgages with fixed rates of up to 10 years.
Perenna’s products will be available to borrowers ranging from first-time buyers, who can access 95% loan-to-value (LTV) products, to those who want to move, remortgage or take out a mortgage in later life.
The loan-to-value (LTV) ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Typically, loan assessments with high LTV ratios are considered higher-risk loans. Therefore, if the mortgage is approved, the loan has a higher interest rate.
Arjan Verbeek, CEO and founder of Perenna, said: “It is very exciting to be a bank that is authorised with restrictions, and it is a major milestone for the team. The UK financial infrastructure requires significant innovation to get growth back and reduce inequality. Perenna will be the blueprint to deliver this, for mortgages as well as SME and infrastructure.
"Perenna will support consumers with buying their first homes, moving home, supporting themselves in retirement, and help the transition to net zero. Perenna looks forward to working with other initiatives to increase private sector investment into the real economy addressing the structural challenges we face.”
Perenna could offer rates of 4% to 4.5% on the 30- to 50-year loans. This would be affected by gilt yields at the time of launch.
Unlike banks, which fund much of their mortgage lending through customer deposits, Perenna will issue covered bonds to pension funds and insurers for longer-term financing.
Its approval comes as the Bank of England is raising interest rates in an attempt to tackle rapid inflation, which has reached a 40-year high of 9.4% in the UK.
Asking prices for homes have dropped for the first time this year, but remain high. The typical asking price fell by 1.3% between July and August to £365,173, according to property website Rightmove (RMV.L).
Last month outgoing prime minister Boris Johnson was considering ultra-long mortgages as a way to increase home ownership in the UK. More flexible mortgages are increasingly being seen as one of the most practical routes to increase home ownership among the young.