Each month, Mortgage Solutions and Specialist Lending Solutions sit down with a key intermediary industry figure to discuss strategy, the opportunity for brokers and the mortgage marketplace.
This month, we are sitting down with Arjan Verbeek, CEO and founder of Perenna, a mortgage lender that offers long-term fixed rates.
How did you get into the mortgage industry?
I began my financial services career in London as a graduate trainee at the Royal Bank of Canada, before moving to Moody’s, where I worked with various Danish mortgage banks, then on to Barclays in 2003 and BNP Paribas just before the financial crisis.
The crisis gave me a greater perspective and I was able to compare mortgage markets across the world and see just how much the industry impacted the health of an economy. Markets where long-term fixed rate mortgages were widespread, such as Denmark, fared significantly better than the UK during this time, and I realised that many of the UK’s issues were made worse by our mortgage market structure.
These experiences led me to set up Perenna with a few other like-minded individuals.
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What has been a defining moment in your career?
Working at Moody’s provided insight to every aspect of the market, providing a learning curve and understanding of risk that became the basis for my future career. This understanding, together with being an economist, resulted in my market understanding and the basis of Perenna.
Why did you think it was the right time or idea to bring long-term fixes to the UK through Perenna?
It was clear that the market did not function after the financial crisis, the reason being the misalignment of policies and products being offered. When we entered the mortgage market, it was clear that the UK mortgage industry needed a refresh. Our research of Office for National Statistics (ONS) data shows that, since 2010, there have been over 640,000 fewer homeowners than there should have been if ownership rates continued growing at pace. This is a direct result of a stagnant market that was too afraid to think outside the box and develop products that meet the needs of those hoping to buy a home. These products were long-term fixed rate mortgages.
What has been the response since launching in the UK?
There’s no getting away from the fact that in a market as big and traditional as the UK mortgage market, it takes time to affect change at the level needed to support the next generation of buyers. Stakeholders need to acknowledge that affordability is affected by the product offering, and long-term fixed rate mortgages have a role to play.
That said, since we received our banking licence, the reception from and openness of brokers to a new type of product has been hugely encouraging, and we have managed to build out a strong network of brokers, as well as third-party partners looking to innovate.
Likewise, with media, we have found there is a huge appreciation of the scale of the problem that long-term fixed rate mortgages can help fix.
We are now working closely with the government to prove the value of longer-term fixes, and believe there is support for innovation within the market.
We’ve seen long-term fixes become more popular in the last year or so; does this validate the purpose of Perenna?
Yes. We are extremely confident in the long-term appetite for our products, and are pleased with its initial traction. We know the market is ripe for innovation, and long-term fixed rate mortgages are a crucial product to help thousands of borrowers tackle the current affordability crisis. Critically, we are not here to replace the existing mortgage products, but provide much-needed choice for mortgage borrowers. Our products help people access mortgage finance whose needs are not serviced by the current product offering, which is why the number of mortgage accounts has been shrinking.
What would you say to people who are still doubtful about the proposition?
In many other countries around the world, long-term fixed rate mortgage products are part of the mortgage options borrowers have at their disposal. This includes the likes of the Netherlands, Germany, and the US. It’s clear from the structural challenges that UK consumers face, from the high cost of living to sudden spikes in interest rates, that more choice is needed in the mortgage market, offering borrowers with low financial resilience a product that protects them against market shocks while accessing homeownership.
Perenna’s goal is to create a nation of happy homeowners through innovation in its mortgage products. First-time buyers and later life borrowers are often marginalised by the existing mortgage options, but Perenna has a potential solution for their needs.
With house prices on the rise, saving for a sufficient deposit to buy has become out of grasp for many young people, who are already delaying major life events such as getting married or starting a family to prioritise getting on the housing ladder. Our long-term fixed rate mortgages allow first-time buyers to borrow more than on a traditional product, reducing the need for a large deposit, and spread repayments over a longer period, reducing the monthly cost, so they can access homeownership earlier in life.
On the other end of the spectrum, our later life products highlight our commitment to tackling age discrimination in the industry. While most high street lenders would categorise over-50s as unsuitable for two-year and five-year fixed rate products, this is a symptom of the inflexibility of legacy products. We see the value of this demographic and know that they are among the most financially stable groups in the UK, allowing them to comfortably borrow. Because our product is fixed for the entire term, we are comfortable not having maximum age caps. This means a 60-year-old can take out a 30-year term with Perenna, knowing their mortgage payment will never change.
Aside from certainty over rates, what are the benefits of long-term fixed rates to borrowers?
Certainty is a critical factor, however the Perenna long-term fixed rate mortgage also allows for much more.
As the rate is fixed for the entire term, there is no requirement to apply a stressed interest rate to affordability assessments. This means a borrower has more disposable income to allocate to a mortgage and therefore could borrow a little bit more with Perenna versus traditional high street lenders, thereby reducing the size of the deposit.
In addition, because we fix the rate for the entire term, we are comfortable not having maximum age caps. This means someone approaching or in retirement could borrow on a longer term to achieve lower payments, knowing their payment will never change.
Just because our rates are fixed doesn’t mean we aren’t flexible. Customers are able to fix a new deal after five years penalty-free.
What do you hope to represent in the UK mortgage market, either through your personal reputation or through your work?
We are bringing choice to the market, helping the under-served mortgage market segments. For too long, mortgage products have neglected the needs of consumers. This means we need innovative thinking to change how we serve consumers, drawing upon what is happening elsewhere in the world and where we are heading. For example, as society continues to age, we will need diversified mortgage products to serve these individuals and families.
As our business grows, we will continue to innovate and add more products to our range, all of which will be centred around meeting the needs of mortgage borrowers.
Fundamentally, we are laser-focused on our mission to create a nation of happy homeowners, and we want to be synonymous with the innovation that drives it.
What has been the best advice you’ve received, either in your personal or work life?
To focus on the long term, and to do what is right, which might not be right for you. That will always be the best outcome eventually for everybody.
What would you like brokers to know about Perenna?
I want brokers to know we offer exceptional service, and that brokers are fully supportive of seeing innovation in the mortgage market. Our first broker net promoter score (NPS) saw us receive +86, which is a testament to the great service our teams are providing.
There are a couple of things brokers should go away thinking about as we enter 2025, however. Are you serving all the potential clients out there? Have you truly considered Consumer Duty in the advice process? Many people are stretching themselves financially and should not risk their homes due to market shocks they cannot control.
On the first question, our products help brokers access clients that are under-served by traditional high street lenders. If your clients are first-time buyers looking to access homeownership earlier in life, or on an interest-only mortgage coming to the end of its term and looking for a suitable replacement to support them into retirement, Perenna may be a great option.
On the second question, with Consumer Duty in full swing, there is no better time to inform clients of the range of mortgage products out there and the different types of interest rate risk they are exposed to. Embedding discussion of the widest range of products, from variable all the way to long-term fixed, is important to leave consumers feeling well-informed of their choices and risks they take on.
