Perenna set to disrupt mortgage market with bank licence approval
Perenna, a new bank which will structurally change the UK mortgage market through its unique funding model, set to disrupt mortgage market with bank licence approval.
Perenna has secured its unrestricted banking licence from the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA). It is the first UK start-up to secure an unrestricted bank licence in 2023.
The approval marks a key milestone for Perenna, allowing it to introduce its innovative long-term fixed rate mortgage products to the UK. Perenna’s flagship product will enable customers to have certainty in their mortgage rate for 20 or 30 years whilst benefitting from the flexibility provided by an Early Repayment Charge (ERC) period of just five years.
Unlike the US, Denmark and other European counterparts, the UK market is dominated by variable and short-term fixed rate products that leave mortgaged households dangerously exposed to rising rates and first-time buyers struggling to get on the housing ladder. Due to this, more than a million UK households are facing an increase of over £500 to their monthly mortgage costs by the end of 2026 [1]. In the UK, borrowers are forced to speculate on their biggest debt due to the limited choice of products, which is not the case in other countries. [2]
The need for innovation in the UK mortgage market has become increasingly evident and is being actively explored. HM Treasury, the Bank of England, think tanks and wider industry members, including Perenna, participated in a roundtable over the Summer, chaired by Anthony Browne MP, and discussed the role long-term fixed rate mortgages can play in improving the UK’s growth prospects. [3, 4]
Perenna’s unique proposition is created by a funding model which relies on issuing covered bonds to investors seeking long-term stable income, such as pension funds and insurance companies. It will enable the business to develop a range of innovative products aimed at addressing structural problems in the mortgage market for first-time buyers, second-steppers and later-life homeowners.
Initially, Perenna will offer its mortgages to people on its waitlist, and then the wider public later this year.
Arjan Verbeek, CEO and Co-Founder, Perenna, comments:
“We’re introducing much needed structural change to the UK. In other countries, billions of pounds of pension savings are channelled into the real economy using covered bonds.
“Together, our unique funding model and banking licence will enable us to do exactly the same in the UK and unlock the housing market, an important part of GDP.”
Colin Bell, COO and Co-Founder, Perenna, added:
“Our mission is to create a nation of happy homeowners .
“We’re excited to offer our flexible products to consumers who, for too long, have been left underserved.
“Our product offers improved affordability, certainty of monthly payments, and flexibility through low ERCs.
“We want people to get on with their life and not worry about their mortgage product.”
James Browne, Senior Policy Advisor, Tony Blair Institute for Global Change, further comments:
“Long-term fixed rate mortgages free borrowers from the interest-rate risk that has now materialised, and since there is no risk of repayments increasing, it is safe for homeowners to borrow more.
“This could unlock homeownership for many prospective first-time buyers.” [5]
1. https://www.bankofengland.co.uk/financial-stability-report/2023/july-2023
2. https://hypo.org/app/uploads/sites/2/2023/07/EMF-Quarterly-Review-Q1-2023.pdf
5. James Browne, Senior Policy Advisor, Tony Blair Institute for Global Change – https://www.institute.global/experts/james-browne
Kindly shared by Perenna
