Brokers have a vital role to play…
Brokers are key to reforming the mortgage and housing market and helping boost homeownership ambitions, it’s suggested.
Arjan Verbeek (pictured), Founder & CEO of the recently-launched bank, Perenna, believes a range of issues in the market need to be tackled.
Affordability continues to be challenging for many would-be buyers, housing stock is not being built fast enough and investment into the economy is stagnant, in Verbeek’s view.
“There are many structural issues that we need to address, from reigniting the dream of homeownership, to providing suitable mortgage products for our ageing demography, and retrofitting our inefficient housing stock,” Verbeek told Mortgage Introducer.
“Flexible long-term fixed rate mortgages can play a role in solving each of these challenges, from increasing the amount a first-time buyer could borrow, to removing age caps so retirees can access a mortgage product that works for them.
“Flexible long-term fixed rate mortgages will also provide an affordable financing solution to undertake much needed retrofitting of UK properties.”
He continued: “What is central to revolutionising the market is providing more choice for borrowers, particularly with respect to how much risk they are taking on when they select a mortgage product. It’s dangerous that individuals enter into a contract not knowing what could happen to typically their biggest monthly outgoing they ever take on. This is where brokers have a pivotal role to play.”
Why Consumer Duty has implications
Believing that Perenna’s relationship with advisers is “critical”, Verbeek urges the intermediary community to consider the implications of Consumer Duty.
“Brokers will play a key role in reforming the market,” he said. “Most mortgage products, as they are designed, create a risk of ‘foreseeable harm’. With Consumer Duty now in place, brokers will see the need to present a wider array of options to borrowers, which include options that remove entirely the risk of payments shooting up, whilst providing flexibility.”
Verbeek believes that the options which advisers find for borrowers should include those which provide the cheapest monthly payment and those which provide full protection from a monthly payment changing.
“If they do this, they will certainly excel in the year ahead,” he said. “Since our launch late last year, over 600 brokers have registered with Perenna, with more joining daily. They welcome the trail fee commission structure which provides them with a more stable income.”
How, then, does Verbeek believe that Westminster’s decision-makers can support the industry?
“The government has taken positive steps, recently providing grants to innovative companies who tackle the decarbonisation of UK housing stock,” he noted. “Perenna was a recipient.
“To see real progress, however, we need policymakers to build flexible long-term, fixed rate mortgages into their long-term economic strategy, recognising the benefits they bring and why our US and European partners have already been utilising these products for generations.”
He continued: “Labour is taking steps in the right direction by announcing their support for longer-term, fixed-rate mortgages, and recognising the positive change they represent, particularly with respect to improving consumer protection. We fully support Labour’s measures to promote ‘securonomics’, and agree that this approach should be at the forefront of the UK’s economic policy.”
READ MORE: Affordability challenges deter two in five first-time buyers from buying a home
What will the mortgage industry be like in a year?
Verbeek remains positive about where the industry will be in 12 months’ time.
“I see the industry embracing flexible long-term, fixed rate mortgages and finally realising that cheaper does not always equal better,” he predicted. “We are optimistic Perenna will be at the forefront of bringing innovation to the mortgage market and better outcomes to borrowers over the long-term.”
Launching a new bank is not a straightforward task, it seems.
“It has undoubtedly been a hard journey getting the business to where we are today, and the road ahead is by no means easy,” Verbeek reflected. “However, it’s clear people are not happy with the way the economy works today and both political parties see this.
“We’re seeing real appetite from policymakers, investors and the wider mortgage market for our offering, as many grow tired of the status quo. Delivering change requires collaboration, and we are open to collaborating with all stakeholders that want to improve outcomes for consumers.”
