Why it’s time to consider remortgaging for the long-term

More than 700,000 fixed-rate mortgages are set to mature in 2021 and the borrowers behind these mortgages will soon face the task of searching for a new, competitive deal to avoid switching onto their lender’s Standard Variable Rate (SVR). For many, their most difficult decision will be deciding how long to fix for.

Nobody can predict whether interest rates will rise or fall in the future, which can choose from picking a two- or five-year fixed rate product akin to a guessing game. Mortgage rates might be at historically low levels, but there are no guarantees how long these favourable conditions will last. Because of this unpredictability, knowing how long to fix for – with two, three, five, or even 10-years can be a real challenge.

However, consumers picking a shorter fix today could face a much more expensive mortgage market when their fixed-rate term expires, and they seek a new deal. Even those taking out the cheapest mortgages today may find themselves paying significantly more two or five years from now if interest rates rise.

Escape the remortgage cycle

Perenna is creating an alternative that removes the guesswork around mortgage refinancing by giving borrowers complete certainty over their monthly repayments for the long-term. Perenna’s fixed for life mortgages will enable borrowers to lock in their rate for up to 30 years – far longer than even the closest alternative currently available. This new approach will allow borrowers to capitalise on the current cheap mortgage rates while removing the risk of rising repayments in the future.

There are other benefits to Perenna’s fixed-for-life mortgages. Borrowers do not need to undertake the time-consuming and potentially expensive remortgage process time and time again. Mortgage brokers can charge hundreds of pounds for their services, and banks may also charge product fees to customers switching their loan, which can cost thousands over the lifetime of a mortgage.

To add yet more stress to borrowers, remortgages can also take weeks to complete, require new valuations of the property, and create avoidable stress. This is a particular issue at present because the coronavirus crisis has caused delay-inducing disruption for mortgage lenders, estate agents and conveyancers.

Who should consider a Fixed for life mortgage?

Is a fixed-for-life mortgage right for everyone? There are reasons why borrowers of all ages could benefit from these mortgages. Older borrowers stand to gain from the certainty of knowing what their payments will be in retirement rather than potentially facing rising repayment costs in later life. Retirees with pension income linked to inflation also stand to see the cost of their mortgage decrease in relative terms as their earnings continue to rise against their repayments.

This stability is also beneficial for younger homeowners too, particularly in today’s fast-changing world. By eliminating the risk of repayments rising, Perenna’s mortgages provide more security to first-time buyers who have smaller amounts of equity in their homes. And when they move, they can take their mortgage with them if they want to – it’s fully portable.

The unique way Perenna loans are structured also means that borrowers can more effectively satisfy the strict affordability tests applied to mortgage applicants. Customers are always asked to prove if they can afford their predicted monthly repayments, but those taking out a long-term fixed-rate product from Perenna will not face the same harsh stress tests applied to customers taking out shorter-term fixed-rate loans. This means that customers don’t have to settle for a smaller than desired loan amount, putting them in a better position to afford the home they really want.

Full flexibility low lock-in

And if the idea of locking into a mortgage rate for three decades raises eyebrows, there is flexibility too. Although the mortgage interest rate is fixed for life, borrowers are still free to move to another deal if they find one that offers a more competitive interest rate. All Perenna’s mortgages are free to switch from after five years, just the same way you could a traditional mortgage plan. That’s why it’s worth considering a long-term fixed-rate mortgage from Perenna that removes the stress from homeownership and offers fair, stable repayments for years to come. So, to be the first to hear more, sign up to our waiting list via the link: Join Waitlist.