The introduction of long-term fixed-rate mortgage products will “unlock” the mortgage and housing market, Perenna CEO, Arjan Verbeek, has claimed.
Following Perenna’s launch of a flexible long-term fixed rate product of up to 40 years in the UK, Verbeek explained: “Currently the housing market and the mortgage market are very closely linked.
“Right now, there are people that own a big home that want to downsize and have to find the right property, but they can’t sell their property because there’s nobody there who is able to afford it at the current price levels.”
He added that using a long-term fixed rate mortgage will mean there are people who can afford this property and then “the entire chain will start moving again because first time buyers will get onto the property ladder”.
As a result, this will “unlock” the mortgage and housing market.
Demand
Explaining the need for such a long-term product, Verbeek stated: “The big problem that we have in the housing market is basically being caused by the mortgage market, we have a very dysfunctional mortgage market.”
He additionally warned that, if there isn’t a strong foundation in the mortgage market, the "right house" can't be built because “the mortgage market is the foundation of the housing market”.
Verbeek stated that, to address this issue, he analysed the market and asked “what’s gone wrong?” because “the mortgage market is not functioning properly”.
As part of this analysis, Verbeek received comments from industry professionals revealing they lack a variety of mortgage products within their range.
“We need to fill the gap in the mortgage market and we need the products to fill that gap, that‘s what we set out to do six years ago,” he explained.
Verbeek also reported that a lot of people in the industry have been focused on the use of technology as a way to address issues within the mortgage market.
“Some people suggested using technology to make the customer journey quicker, which is great,” he explained.
However, Verbeek cautioned that the problem with this approach is it doesn’t entirely help, as “you still have the same products”.
The missing product
As a solution, Verbeek suggested that the product that was missing in the UK was long-term fixed-rate mortgages.
He explained: “If someone knows they’re going to pay £500 a month, they’re not gonna differ, it doesn’t matter what the value of the house is or if Liz Truss does 10 mini-budgets, the household is still paying the £500.”
As a result of this, the household is “really protected against shocks”.
However, he added that such a product “just doesn’t exist in the UK” and that’s the product that “first time buyers and people over 55 need”.
“We need products in the first time buyer space and the later life space to get the housing market moving,” he explained.
Perenna founding
Verbeek also explained the founding of Perenna to provide such a long-term product, saying: “We started a project to set up and run a bank because you cannot fund these products off a deposit base.
“Instead we designed the brand new bank, fintech bank, and modelled it on the continental model in Denmark, that will issue bonds to insurance companies and pension funds.”
These bonds were used to offer long-dated fixed rate mortgages and “really give the right product to these large lenders that exist in the UK”.
Verbeek added that Perenna has already started lending for their long-term fixed-rate mortgage product, with the first purchase transactions coming through.
Additionally, he reported that the company is increasingly getting brokers on board and getting contracts in place with other distribution channels.
tom.dunstan@ft.com
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