The boss of Britain’s largest mortgage lender has said it is “unlikely” the cost of borrowing money to buy a house will return to the low levels of the past decade.
Lloyds Bank chief executive Charlie Nunn said the bank expected mortgage rates to fall but not to the near-zero levels of the 2010s.
Interest rates on new fixed mortgage deals have risen in recent years as interest rates have been raised in an attempt to slow skyrocketing prices due to the coronavirus pandemic and Russia’s invasion of Ukraine.
Despite share price declines following recent interest rate cuts, brokers have warned that the trend could come to an “abrupt stop”.
The average two-year fixed mortgage rate was 5.36% on Friday, according to financial information company Moneyfacts. The five-year agreement is 5.05%.
Asked on BBC Sunday with Laura Kuenssberg whether “cheap” mortgage deals would return, Mr Nunn said: “We do think they [mortgage rates] There will continue to be a decline, but I think a return to the level of zero interest rates over the past decade is unlikely. “
Nunn said the increase in borrowing costs was “really challenging” for homeowners, but noted that only around 40% of UK properties have a mortgage.
He added that the average income of a household with a mortgage was £75,000, so “many of these households have been able to absorb” the higher repayments.
“Mortgage arrears and people struggling with their mortgages have actually fallen again since December,” he told the BBC.
High interest rates affect people in different ways. Mortgage holders with a variable or tracker mortgage, or those looking for a new fixed rate deal, will have higher monthly repayments.
But first-time buyers looking to get into the market are finding it more difficult to get into the market, being priced out of the market as it becomes increasingly difficult to secure affordable deals.
An estimated 1.6 million existing borrowers have relatively cheap fixed-rate deals due this year.
The UK’s base rate, which determines the borrowing costs banks and building societies charge for loans, is currently 5%.
Interest rates remained at current levels last month, with policymakers arguing they need to ensure inflation – a measure of how quickly consumer prices rise over time – remains at normal levels.
Nunn said that while many parts of the UK “continue to struggle” due to the cost of living, 2024 has marked “a shift where we see the majority of people in the UK feeling more financially secure”.
“For most people, things are getting a lot better,” he said. “Savings are up in deposit accounts, fewer people are stuck with loans and business confidence is actually at its highest level in nine years.”
