So, you’ve decided to buy a new-build home? Whether you are a first-time buyer or an experienced mover, there are many benefits and potential pitfalls to be aware of when purchasing a newly built property.

Despite the pandemic leading to the temporary closure of the housebuilding sector, 148,630 new homes were completed in 2020 and demand for these properties has been fuelled by a real variety of reasons, including the Government’s Stamp Duty holiday and a national ‘race for space’ which emerged as many people sought to secure additional outdoor and home working space in the wake of the UK’s multiple lockdowns. These factors, along with returning interest from international property buyers and property investors helped to create a housing boom in 2021.

New-build homes are a popular option for many reasons and provide some benefits that simply aren’t available from pre-owned homes. These properties are appealing as they require minimal decoration and often come with new build guarantees. In addition, a new-build home is a blank canvas, with fresh tiling and paintwork for buyers to enjoy immediately after moving in, and energy costs are typically lower. Many buyers also like being the first owners of a property.

Consider these drawbacks

However, there are naturally also drawbacks to consider. The so-called new-build premium means that in some cases buyers can end up paying more for a newly built home than they would for an equivalent older property. Much like buying a new car, there’s also the possibility of the price of a new home falling after purchase. This ‘forecourt’ premium can therefore make it difficult for some homebuyers to get their money back if they try and sell within a couple of years of moving in. However, property prices are inherently linked to and dependant on demand. With both new builds and older properties, their value is dictated by wider market conditions and can go up as well as down.

After you’ve visited your plot and the site’s show home, many new-build developers will also let you specify certain finishings within the build – such as flooring, tiles, and kitchen cabinets etc. While customisation options are appealing, the more upgrades or bespoke fittings you opt for, the longer you may have to wait. With this increased risk of delays with an “off-plan” home, many buyers agree on a long-stop completion date with the house builder. This is where the developer agrees to pay compensation if the construction is delayed beyond a certain date.

What else should buyers look out for?

There are several other areas buyers should keep a close eye on when purchasing a new-build home. These properties typically come with a warranty, but this will usually only cover building defects and structural issues. With new-builds, you can expect snags like unfinished carpets or a missing door hinge, so be prepared to have a snagging survey as soon as the developer allows you on site.

Prospective buyers should also ensure they know whether their property is freehold or leasehold. With the latter, the owner usually pays an annual ground rent to the freeholder. Leases can be as long as 990 years but are typically between 100 and 125. Homeowners can struggle to obtain a mortgage if the lease has less than 70 years left to run. However, there have been proposed changes as Government pledges to end leaseholders’ ground rent payments to their freeholders.

If you are a leaseholder, the freeholder may attach certain conditions to your property, such as requiring that no alterations are made to the property without prior consent. However, leaseholders are fully responsible for any maintenance and building insurance costs. New-build houses should not be sold on a freehold basis, but most homes in flats are sold in this way.

Correct at time of publishing.

Did you spend last year’s lockdowns looking around your home and dreaming up improvements to make a nicer living environment? Look no further. This blog post is for you.

We’ve teamed up with Gloria Sanchez to share her insights on what good design means, creating a design vision and her favourite furniture shops. Gloria is the co-founder of Tailored Living, a London-based interior design company that develops bespoke home designs based on a philosophy of implementing the customer’s personality, taste, and lifestyle. The company has delivered interior designs to some of the most prominent London homes.

What is good design?

“Interior design massively impact how we feel both physically and mentally in our homes. As designers, our objective is to awaken positive feelings and create spaces that make the people living there feel great.”

“Good design is a personal experience. What works for one person, won’t work for others. It’s easy for designers to develop spaces that look good based on the most recent design trends. But it isn’t easy to create a space that will make the person living there feel great for years after delivery. That’s why during the design brief and overall design process we take extra care to ensure the final interior encompasses the personality and preferences of the client.”

How do you develop your design ideas?

“Our design process is all about understanding the customer. It starts with conversations where we attempt to develop a shared vision for the space. We’ll discuss their lives, values, aesthetic preferences and what they want to achieve with the space. We are always delighted if we can discover personal items such as inherited furniture, travel memories, or art to develop the designs.”

“When we have developed a profile and vision, we can start sketching and translate the ideas onto a mood board which we’ll use for the final designs. The execution of the project will only begin when we have a vision that makes the customer feel good.”

Where do you shop?

“My favourite place to shop is Chelsea Harbour Design Centre. They have the most extensive selection of everything under one roof. A close second is Andrew Martin. Their style is relaxed and allows for sophisticated items that are quirky and a little different. We deliver designs that will last for years. It’s important to me that the furniture we work with can stand the test of time.”

“Creating living spaces and interior designs does not have to cost a fortune. It’s possible to find great items on the highstreet. Zara Home and H&M home have many products that can help set the ambience of a room. Sometimes, the little things such as a flower vase or a cushion with an accent colour reinforce and complete the vision.”

How do people get started with interior design?

“Planning and developing a vision is an essential step of any interior design project. Start by measuring the room and developing an understanding of what to select within the constraints of the space. Adjust plans accordingly. A room full of things will make it difficult for people to move around and live there. Limit your furniture choices to the few items that you truly need. Make sure that the furniture fits the room. A big sofa cramped into a little room will take too much space and overpower the overall impression. The same goes for breaking lines. Be careful not to block passageways. It hurts the harmony and puts limits on using the space.”

“Developing a vision for the space is essential to ensure a coherent impression. Mixing and matching works if you choose an eclectic style, but it’s not easy to get it right. Having a vision and staying true to it will help selecting the right items and make good purchase decisions. Find inspiration by research trending design styles or work by interior designers. Instagram and Pinterest are excellent sources for discovering designers and trends that can help develop a personal vision.”

Visit Tailored Living to see more of Gloria’s work here: https://www.tailored-living.co.uk/

Correct at time of publishing.

Are you a first-time buyer considering buying a property with Help to Buy but find it difficult to understand what it means for you – the consequences and potential risks? This blog post is for you.

What is attractive about Help to Buy?

Help to Buy offers first-time buyers the chance to buy a new build property with just a 5%deposit. The government supports the loan and provides a 20% loan (up to 40% in London) of the property purchase price to make it attractive for mortgage lenders to support first-time buyers. Mortgage lenders will within the Help to Buy scheme finance the remaining 75% of the home purchase. The government loan is interest-free for the first five years.

By lowering the loan to value (LTV), Help to Buy enables you to access lenders more affordable mortgage rates. These rates typically kick in around 75% LTVs, which are more attractive for lenders due to lower risk.

At first glance, this is an attractive proposition, but remember that the government loan is repayable, and interest starts accruing after the initial 5-year term.

Help to Buy risks to consider

The government will take part in an increase in your home’s value when you remortgage or sell it. Plus, the government loan is not a fixed amount. Instead, it’s a percentage of your home’s value. If your home value increase, so does the debt you owe.

For example, if you bought a home worth £250,000 with a 20% Help to Buy loan. You would owe the government £50,000. If your home has increased in value when the time comes to remortgage or sell your home, you might be liable for a much higher amount. Let’s say the home value over five years has increased by 20% to £300,000. Your Help to Buy debt is now £60,000, £10,000 more than the original debt.

Suddenly, Help to Buy is a costly option compared to a standard mortgage which will never increase based on increasing property prices. The incentive to get on the property ladder early and start building home equity has lost its appeal slightly.

Interest rates can get expensive  

In year six, the loan starts accruing interests. The interest is payable in addition to the lender repayments. The interest on the equity loan will be 1.75%. After that, the rate increases each year by the retail price index (RPI) measure of inflation, plus 1%. This is known as ‘staired’ interest. There is no cap on the interest rate, which means the loan can become expensive to maintain.

Restrictions  

Help to buy is only available if you are buying a new build property, with a purchase price of up to £600,000. Also, you have to be a first-time buyer. This rule applies to all people buying the property not just one of you. The property must also be being sold by a Help to Buy registered builder.

Remortgaging can be difficult  

Remortgaging your Help to Buy loan can be difficult. When assessing your affordability, lenders will look at your obligation to repay the Help to Buy loan as a negative factor. If you cannot repay the government loan, you risk reverting to your lender’s Standard Variable Rate when your fixed rate comes to an end. If this happens, you will have to pay a premium on your mortgage while also paying interest on the Help to Buy loan. This could quickly amount to hundreds of pounds extra cost per month.

To prevent this, before you take out a Help to Buy loan make sure that you can remortgage in the future for the full mortgage plus government loan.

How about an alternative?

Help to buy has been immensely popular and helped over 300,000 people buy a home. It’s easy to understand the appeal of the scheme. A 5% deposit and low monthly payments are difficult to resist for prospective home buyers. But sometimes, things really are too good to be true. You must be aware of the risks of Help to Buy and have a plan to repay the government loan before the five years have passed.

Soon there will be a viable alternative to Help to Buy. Fixed for life mortgages will also allow you to buy a home with only a 5% deposit. The interest rate may be higher for the first five years, but you will own your home in full so any increase in value will all belong to you, and your monthly repayments will remain the same throughout the loan term which will be up to 30 years. Fixing your mortgage for life means you can borrow more as the lender does not have to check if you can afford your mortgage if rates rise significantly, this means you probably don’t need the Help to Buy top-up loan, and your mortgage payments will not increase.

This also leaves you free to remortgage if it is in your interest to do so, not because you have to, all without early repayment charge after five years.

Finally, there are none of the constraints if you use fixed for life mortgages. You can buy any property, as long as it meets the lenders wider criteria. You don’t have to be a first-time buyer, and also any value works. Help to Buy helps but has consequences and has restrictions.

Correct at time of publishing.

Let’s face it. Last summer wasn’t much to shout about, was it? The vast majority of us spent it in some form of lockdown, perhaps hosting the occasional socially distanced barbecue, as we did our best as a society to mitigate the impact of the pandemic. Yet, for all the disruption and heartache caused by the crisis, there were some small silver linings. While many of us would have preferred to carry on going out into the world and doing what we do best, it nevertheless provided a rare opportunity for introspection. Everything stopped, and we were able to turn our focus inward, to our families and homes.

Even now, with vaccines being rolled out and a semblance of normality hopefully on the horizon, that inward focus has stayed with many of us. According to the Office of National Statistics (ONS), nearly a quarter of the UK’s population worked from home in 2020, and if recent surveys are anything to go by, flexible ‘hybrid working’ is here to stay for the foreseeable – at least for those who have desk-based roles.

All of this has led to a home improvement boom. People want to invest in their homes, from carrying out big home improvements that they’ve put off for far too long, to redecorating rooms, to adding working space and paying more attention to the not-so-little things. This homeward focus has been so pronounced that McKinsey called it a “rebalancing of the homebody economy” in their 2021 consumer survey. In it, they conclude that people want the investments they’ve made in their home life to continue long after the pandemic is behind us.

So as we move firmly into the summer of 2021, a summer of optimism and forward-thinking, where we’ll soon be able to have family and friends over to enjoy the homes we’ve rediscovered during the pandemic, what can we do to make sure our homes are welcoming and summer-ready?

Make room for summer

A wise person once said, “Clutter isn’t just the stuff on your floor, it’s anything that stands between you and the life you want to live.” So if you’re in the market for a nice summer of barbecues, lounging in the garden, or having friends over for dinner, start making space for it. Get rid of anything you haven’t used for six months or more, either by selling or donating it and put any winter items into storage and out of sight. Picture yourself or your friends and family enjoying your home and build to that vision. Where are they sitting? What can they see? Pulling the tarpaulin off your garden furniture is all good and well, but what about that pile of wood in the corner you never quite got around to turning into a fence?

Get green-fingered

According to a survey recently featured in the Financial Times, gardening was listed as the second most popular lockdown activity after bingeing Netflix, putting it ahead of exercise, reading, gaming, and cooking. If you’re reading this with abject horror, don’t worry; a little goes a very long way when it comes to getting your garden summer-ready, and it can make a huge difference to how you and your guests experience your home. Give the garden beds a tidy, pull out some weeds, and trim the edges of your lawn, and you’re most of the way there. If you don’t have a garden, get one! A herb garden in a kitchen or balcony is a great way to give your home a much-needed shot of green in the summer months.

Grease those elbows

It’s amazing how much cleaning can make a difference to your home. Even if you tackle one room at a time, a deep clean can give you a huge mood boost and a real sense of homely pride. So grab your marigolds, pick up a wire brush and some soap, and go to town on the barbecue set that’s been sitting in your garage for the past 8 months. You will appreciate it in the future when donning a chef’s apron with a beer in one hand and a set of tongs in the other. Spring cleaning is not just for spring.

And remember, if you want to go one step further and make some permanent changes to your home, such as building a new extension or making it more environmentally friendly, now is the perfect time to invest. Perenna will offer flexible fixed-for-life mortgages that remove the risk usually associated with homeownership, allowing you to escape the costly and stressful remortgage cycle and plan for your future – whether that future’s a brand new conservatory or a new kitchen. Release some of your hard saved equity in your home to re-invest in your home or your life – you can’t eat bricks.

Correct at time of publishing.

Getting on the property ladder in the United Kingdom is difficult. Having a suitable deposit and being able to borrow enough are challenges for many first-time buyers and home movers. At Perenna, our mission is to change that.

When we have secured our banking license, it’s our ambition to introduce 95% LTV (“Loan to Value”) mortgages with a fixed for life interest rate along with flexibility that puts you in control. This blog post explains what a 95% LTV mortgage is, why some lenders can’t offer high LTV mortgages, and why Perenna will be able to when we get to market.

What is a 95% LTV mortgage?

A 95% LTV mortgage is a loan where you take out a mortgage for 95% of a property’s value. This way you only pay a 5% deposit to buy a home. For example, to buy a house worth £300,000, you would only have to put down £15,000. The 95% LTV mortgage is generally attractive for first-time homebuyers who struggle to save for a deposit.

Why is there so little supply in the market?

The main reason lenders don’t offer high LTV mortgages is that they fear house prices will go down in the future. If you default and the house price falls below the loan amount, the lender cannot recoup the loan by selling the house and thus loses money.

How can Perenna offer 95% mortgages?

To offer 95% mortgages, lenders must ensure that you can repay the mortgage. At Perenna, we do that through a strong focus on affordability and by offering fixed for life mortgages.

Fixed for Life mortgages are mortgages where you pay the same amount for the entire term of the mortgage. Making it easier for you to budget payments and reducing the risk of default.

Correct at time of publishing.

Meet Aniq Ahmed, our ‘Culture Custodian’ and a highly valued member of our team. Aniq serves as our Head of Regulatory Affairs with the critical responsibility of leading our bank application process, acting as the point of contact with the regulators on a day-to-day basis. Aniq oversees a wide range of workstreams and supports our employees in the mission to receive a bank licence.

After leaving university, Aniq went into management consulting at Deloitte, working with various local and international clients such as Credit Suisse, UBS and The Co-operative Bank. Aniq also has experience setting up new banks working with Castle Trust Bank before joining Perenna in July 2020.

Aniq’s enthusiasm for Perenna stems from his belief that we are starting something transformational in the UK mortgage space. For too long, consumers have had little choice, and flexibility in the way they live their lives because of their mortgage product. Perenna is changing that through introducing fixed for life mortgages, a proposition which values long-term customer relationships, provides financial security, and ensures individual freedom. Aniq adds, customers should not take a risk with the repayments for their largest financial commitment; fixing your mortgage for 30 years will benefit a lot of customers and wider society in the long run. There may be life changes, changes to the external environment or even changes to your property, but consumers should not worry about those changes being compounded by their mortgage payment increasing.

5 Quick Questions

Favourite Food?

My most consistent food is Chicken & Rice. My favourite food is Pasta Bolognese.

Favourite Holiday Destination?

Japan. I loved my visit to Tokyo, Kyoto & Osaka.

Favourite film & TV show?

Current favourite TV show is The Mandalorian; my all-time favourite TV show Is LOST and favourite films would be Avengers Endgame & Interstellar.

Favourite app on your phone?

The Philips Hue Light app that allows you to control home lighting from your phone.

What items would you take to a deserted island?

Netflix and a cabin.

How do you stay motivated working from home?

I’ve been working at home since March 2020, so it’s nearly been a year now. Transitioning has been a challenge. I’m a real collaborator who enjoys working with others in an office environment, so it’s definitely been a new experience for me. Having said that, with Teams & Zoom we’ve tried our best to keep everyone together, even though we’re physically apart. Whilst it’s not perfect, remote does have advantages. For example, I used to spend close to three hours commuting a day. I certainly don’t miss that.

Now, I really enjoy having a full night’s sleep, eating multiple breakfasts and getting in my daily exercise without the worry of catching trains. Remote working will have many advantages for people who previously had issues growing in their career because of life decisions and I’m looking forward to incorporating those benefits within the culture at Perenna. For example, as a business, remote working allows us to attract talent, wherever they are, not just where we are. That’s testament to some of the people that have joined recently, and I think it allows us to attract the best people possible.

What hobbies do you enjoy in your spare time?

I’m quite big into Astronomy. The stars and the universe have always been an inspiration to me. I’m especially captivated by NASA’s work identifying planets outside our solar system and beyond. It’s exciting. A long time ago, I attended night courses on Astronomy & Astrophysics at The Royal Observatory in Greenwich. I’m keen to return to this hobby once we can travel again.

My other hobby is a podcast called ‘The House of Wisdom’ that I co-host with a university friend. The idea came up through a chance discussion we had. He was preparing for his PhD examination and asked me to help review his paper and thesis. We were sitting in one of the King’s College study rooms and I said to him, “You know, this thesis is great, but so what? There’s a lot of theory here, but I don’t understand what you can do with this in the real world.” We had a long conversation about the role of academics and the value they can bring to society.

We concluded there are probably many academics out there working on meaningful things, and it would be exciting to discuss with them how their ideas could impact policy. We decided to set up a podcast and interview , what we dubbed, “academic Influencers” to understand how their ideas could change the world. This is our first season. We’ve touched on topics ranging from climate change to mental health, to obesity, to big data, and various others. I feel very privileged that I have the opportunity to regularly talk with passionate individuals about interesting topics.

Want to listen to Aniq? You can find the podcast here: House of Wisdom Podcast

Correct at time of publishing.

Help to Buy has backed more than a quarter of a million house purchases since it launched in 2013.1 The Government-backed equity scheme, which provides a 20% top-up loan (or 40% in London), has helped many buyers to step into a new build property and often with just a 5% deposit.

Yet, Help to Buy is soon set to change and those intending to use the scheme might now find that they want to look to an alternative.

What’s happening to Help to Buy?

From April 1st, Help to Buy will be restricted to first-time buyers only. To qualify for the scheme, you must be buying your first home, so for the thousands of second steppers who currently account for 18% Help to Buy users, this means they can no longer benefit from Help to Buy.

These are not the only changes to Help to Buy though. Even if you still qualify as a first-time buyer, new regional price caps could also put your dream property beyond reach. In many areas of the country, these caps are lower than the average house price, so if you’re looking to buy in a city like York or Cambridge, you might find it difficult to find a place that qualifies for Help to Buy.

In just two years’ time the scheme itself will also come to an end. So, if you’re looking to step into a property but don’t have a large enough deposit, what are your choices?

What’s the alternative?

Long-term fixed-rate mortgages could soon offer an alternative route for borrowers to purchase the home of their dreams.

At Perenna, we’re planning to launch a 30-year fixed-rate mortgage that allows buyers to step onto and up the housing ladder with as little as a 5% deposit. With a rate we call ‘flexible fixed for life’, there are no shock increases in repayments. By contrast, the Government’s Help to Buy scheme is an equity loan that you must start paying back after five years and that means your monthly outgoings could rise significantly. Also, do you really want to share the equity you have in your home with your lender, Perenna will not take a share of your equity.

As well as avoiding those higher repayments, customers taking out long term loans will be able to buy without being subject to the strictest mortgage affordability tests on variable rate or short-term fixed-rate mortgages that have blocked many young people from buying a home. For two- or three-year fixed-rate loans, borrowers are required to show they can afford to pay back their mortgage if rates were much higher (usually at lender’s standard variable rate plus 3%) but a long-term fix gives homeowners certainty over their repayments for years to come. This means such stringent stress tests are not necessary.

A mortgage for you

With a Perenna long-term fixed-rate mortgage you won’t suffer from the same restrictions in place with schemes like Help to Buy. While Help to Buy has proved a suitable route for thousands of buyers onto the ladder, it’s focused solely on new build properties. This restricts the choice available to buyers with smaller deposits, but with long-term fixed-rates offered by Perenna, borrowers can use their mortgage to fund the purchase of older properties too, just as long as it’s your primary residence. This could be a vital lifeline if you’re looking to buy in smaller towns or villages where there are fewer new-build properties to choose from. If you or your other half has or currently own another property, you can still buy that dream home – our mortgages won’t be restricted to first-time buyers either.

Alongside this, some users of Help to Buy are also already finding it challenging to find lenders that are willing to help them remortgage. Our long-term fixed-rates will have built in flexibility too. Perenna’s products will be fully portable, so you can take them with you when you move, and with early repayment charges for just the first five years, it’s fully possible to switch if a better rate becomes available.

Whether you have fallen outside the Help to Buy scheme rules or are just looking for another option, long-term mortgages will soon be a viable alternative for all borrowers. If that’s a mortgage that sounds like it could meet your housing needs, sign up to our waitlist to be the first to hear more.

Correct at time of publishing.

In the UK, we’ve traditionally had a preference for short-term fix mortgages. Luckily for consumers, changes are coming to the market – a fixed for life mortgage where the interest rate is fixed for the whole loan duration!

Here are 10 reasons why you should consider a a fixed for life mortgage.

1 Borrow what you can afford

Since the global financial crisis, it has become increasingly difficult for consumers to get on the property ladder. The United Kingdom is experiencing an affordability crisis and housing is expensive in relation to incomes. New regulation following the financial crisis requires that lenders ensure borrowers can afford their mortgage payments and apply strict affordability underwriting criteria. This protects the borrowers from higher interest rate environments but also restricts the amount that a consumer can borrow under a variable or short-term fixed-rate mortgage.

In contrast, a fixed for life mortgage offer consumers the same interest rate throughout the loan term. By fixing the interest rate, the fixed for life lender does not have to stress test borrowers for potential rate rises. As a result, certain borrowers can borrow more under a fixed for life mortgage.

2 Borrow with a smaller deposit

A mortgage is a loan secured by an asset – the house. To issue the loan, the lender has to be certain that a) the borrower can sustain paying the monthly payments throughout the lifetime of the loan and b) that the outstanding value of the loan does not exceed the value of the asset. Fixing the interest rate and locking in monthly payments years ahead enable the lender to gain more confidence in the repayment ability of the borrower. This enables lenders to issue loans on a higher LTV basis.

3 Never overpay

With a fixed for life mortgage, you never have to worry about adjusting to a standard variable rate which may be more costly. The standard variable rate is what a borrower is transferred onto when the short-term fix mortgage ends. The lender can set the rate at any level they want, meaning your monthly payments are uncertain. Some borrowers who are caught on a standard variable rate are unable to refinance their mortgage.

4 Don’t worry about remortgaging

Getting a mortgage can be a stressful undertaking. It’s not fun spending weekends looking through price comparison sites and evenings speaking to mortgage brokers. Many borrowers with short-term mortgages have to remortgage every 2nd or 5th year.

Luckily, with a fixed for life mortgage, you don’t have to worry about refinancing. Ever. Unless you want to.

5 Budget with confidence

A 30 year fixed for life mortgage brings certainty to expected spending and enables you to budget years ahead with confidence. Knowing your largest financial outgoing is certain for 30 years will help you plan for the other things that matter in life. Life is full of surprises but a fixed for life mortgage won’t be!

6 Make key life decisions without the baggage

Being free to make key life decisions is a must. Short-term fixed mortgages often come with early repayment charges, preventing borrowers to move and make big life decisions. An early repayment charge is a penalty applied if you repay your mortgage during a tie-in period. This will re-set after each remortgaging. A fixed for life mortgage will only have early repayment charges for the first 5 years. Hereby providing borrowers with 25 years freedom and flexibility to live their lives to the fullest.

7 Freedom to move with full portability

Another important flexibility component of fixed for life mortgages is porting – the ability to port your mortgage to a new property. Porting your mortgage means transferring the same mortgage deal to a different property – while keeping the same lender, interest rate, loan amount and rules. One advantage of porting a mortgage is that if you’re still in a tie-in period, you don’t have to pay any early repayment charges if you port. If you’re no longer in the tie-in period, you will also be a position to evaluate the market terms and see if there are better deals available. Win-win!

8 Protection against market changes

You can control many things in your life, but the economy, house prices, job market and government regulation are outside of most peoples control. Typically, if the housing market goes down in value close to your remortgaging date, the available products to you may be more expensive. or in some cases lenders may not lend to you at all if the loan to value is too high. In some cases, banks might not be able or willing to lend to you due to changes in rules. General rule changes are introduced for a good reason but might have unintended consequences. When the bank regulators changed the rules in 2014 to protect against the next crisis, many people could not refinance and were stuck on a high-interest rate, more largely known as mortgage prisoners.

A fixed for life mortgage is protection against uncertainty and events outside of your control. You will have full clarity of monthly payments for the next 30 years and will not be paying more if rates start to rise.

9 Borrow in retirement

Later life borrowers often have difficulty obtaining a mortgage. Mortgage lenders are wary that their pension incomes may not be sufficient to absorb interest rate rises. Therefore, lenders have limits on how old a borrower can be when they take out a loan and how old they will be when it ends. The closer the borrower is to the maximum age, the less time they will have to pay off any new mortgage.

A fixed for life mortgage is the solution. As long as the borrower can afford the fixed monthly payments, there is no concern of interest rate rises. Later life borrowers can get on with their lives and support their living costs in retirement, provide financial assistance to family members and live independently in suitable homes for as long as they are able and want to.

10 The right timing

The interest rate is at a historic low. If you’re too young or don’t remember the 80s it’s worth asking someone you know about their mortgage experiences back then. In 1985 the interest rate reached 17% and there was no certainty the rate was coming down. The world is different today. We’re facing great uncertainty about the future. This is reflected in the interest rates. A low-interest rate fixed for life mortgage looks like the perfect loan for borrowers who want financial stability and knowing how much money they will spend in years to come.

Correct at time of publishing.

Paying off your mortgage is one of the biggest financial milestones in your lifetime. Being mortgage-free is something that most of us will have been working towards since we first stepped on the ladder. For some, it might even be synonymous with the idea of having the financial freedom to enjoy the retirement we want whether that’s renovating the kitchen, building an extension or taking a once-in-a-lifetime holiday.

Working towards paying off your mortgage is certainly no bad thing, but the borrowing landscape has now changed dramatically. Having debt in later life doesn’t have to mean you can’t live the retirement you want.  In fact, a mortgage in later life could actually give you the means to live your best retirement.

New opportunities due to low interest rates

Today, interest rates are sat near record low levels and borrowing is cheaper than ever – particularly when it comes to mortgages. At the same time, house prices have risen substantially in recent decades. According to the Office for National Statistics, prices increased by 4.7% in the year to September to reach an average of £245,000. If you’re a homeowner who has spent those decades steadily paying off the mortgage, it’s likely you’ll now have much more of your wealth tied up in the property you own – and you certainly won’t be alone in that regard.

Unlocking that housing wealth in later life through a mortgage could help you to access the funds you need to enjoy the retirement you’ve always wanted. But how can you make that wealth work to your advantage?

Making your property wealth work for you

Long-term fixed-rate mortgages, which will be launched soon by Perenna, can provide a viable option, whether you’re looking to help your children onto the ladder or enjoy your best retirement. Given the low interest rates at present, this could be a cost-effective way to release equity and, because rates are fixed, you’ll know exactly what you’ll need to pay in the future.

With a long-term fix like those Perenna will soon offer, you can use the freed-up funds to achieve the lifestyle in retirement you want, or alternatively to carry out home improvements and even pay for holidays.

Long-term mortgages are not equity release plans. They do not have compounded interest rates where the debt you owe grows quickly and which could leave you with little to pass on as inheritance to your loved ones.

The Bank of Mum and Dad

What about helping your kids too? High house prices are not just an issue that affects older generations – they can also make it difficult for younger people to save enough money for a deposit to step onto the ladder. It’s not surprising then that a growing number of first-time buyers are relying on the so-called Bank of Mum and Dad to help make their own property dreams a reality. But if you have no readily-accessible cash after paying off your mortgage, this can leave your children with limited options.

Downsizing into a smaller, less expensive property is one way of releasing these funds, or you could take out an equity release mortgage. Both can be expensive though, and from the hassle of moving to equity release eating into inheritance, there are also other drawbacks. Likewise, high-interest borrowing such as credit cards can potentially undo a lifetime’s good work of paying back your mortgage debt.

A route onto the ladder too

Taking out a long-term fix could even reduce or remove the need for you to act as the Bank of Mum and Dad for your children too. One of the greatest challenges facing younger buyers today is passing strict affordability tests when it comes to getting a mortgage. Borrowers must prove they can meet repayments if interest rates were much higher, in some cases up to 7%. This has led to first-time buyers being told they cannot afford a mortgage, even if their monthly repayments would be much lower than what they are currently paying for their rent. Yet, by taking out a long-term mortgage with a fixed interest rate, your children wouldn’t have to pass the same level of stress testing, making it easier for them to achieve their dream of homeownership without having to draw on the finances you need to rely on in later life.

Correct at time of publishing.