Mortgage rates are “unlikely” to fall back down to the low levels seen in the last decade, the head of one of the UK’s largest lenders has said.
Charlie Nunn, chief executive of Lloyds Bank, told the BBC that while mortgage rates are expected to come down, they won’t reach the near-zero rates they were during the 2010s.
Interest rates have risen sharply over the past two years as part of the Bank of England’s efforts to control the UK’s soaring inflation. The Base Rate, which impacts mortgages and other loans, as well as savings accounts, was raised to a 16-year high of 5.25 percent in August 2023.
This saw deals on standard variable rate mortgages spike higher than eight percent by October 2023.
After one Base Rate reduction to five percent and economic stability somewhat resuming, mortgage rates have been falling ever since. The average two-year fixed rate deal averages 5.36 percent while a five-rate fix currently averages 5.05 percent, according to Moneyfactscompare.
Despite expectations that the Bank of England will continue lowering central interest rates as inflation stabilises, homeowners shouldn’t expect a return to pre-cost-of-living-crisis lows.
When asked on the BBC’s Sunday with Laura Kuenssberg programme if “cheap” mortgage deals were ever going to come back, Mr Nunn said: “We do think they [mortgage rates] are going to continue to come down, but getting back to the level we saw in the last decade where interest rates were down at zero I think is unlikely.”
He noted that, while the increase in borrowing costs had been “really challenging” for homeowners, only around 40 percent of UK properties have a mortgage.
He told the BBC: “Mortgage arrears, people struggling with their mortgages, have actually been declining again since December.”
He added that the average income of a family with a mortgage was £75,000, and so “many of those families have been able to absorb” higher repayments.
While there were many parts of the UK “continuing to struggle” due to the cost of living, Mr Nunn said 2024 had marked “the turn that we have seen in terms of most people in the country feeling more financially secure”.
He said: “For most people, it has got a lot better. There are more savings in deposit accounts, there are less people struggling with loans and actually business confidence is at a nine-year high.”
