As base interest rates rise and homeowners seek to fix their mortgage repayments for longer, new UK lender Perenna has announced it plans to offer 30-year fixed-rate mortgages to first-time buyers, home movers and ‘later life’ borrowers.
Financial regulators have granted the lender a licence with restrictions which Perenna say means they are “inching closer” to their goal of launching 95 per cent loan-to-value mortgages, with rates fixed for a period of 30 years.
Other lenders offering long-term fixed rates include Molo (up to 40 years), Habito (25 years) and Kensington Mortgages (25 years).
Long-term fixed-rate mortgages usually have higher interest rates than those available with shorter fixed-rate terms such as two- or five-year fixes.
One common downside to long-term fixed-rate loans are that mortgagees do not see a benefit if base rates fall, they’re locked in for the duration, while remortgaging to get on a lower rate usually incurs large early repayment charges.
One advantage is that it becomes easier for homeowners to budget, as they know exactly how much their repayments are for a longer period.
Perenna say their long-term fixed-rate loans will have no early repayment fees after five years, meaning mortgagees will be free to remortgage if rates go down.
Prime Minister Boris Johnson last month spoke of plans to encourage multi-decade mortgages that could be transferred between generations.