The cost of borrowing to buy a home is “unlikely” to return to the low levels seen over the past decade, the boss of the UK’s biggest mortgage lender has said.
Charlie Nunn, chief executive of Lloyds bank, said the bank expected mortgage rates to fall, but not to the near-zero rates they were in the 2010s.
The rate charged on new fixed-rate mortgage transactions has increased in recent years due to an increase in interest rates to try to slow the surge in prices, triggered by the Covid pandemic and the invasion of Ukraine by Russia.
And although they have fallen recently after an interest rate cut, brokers have warned the trend could end “abruptly”.
As of Friday, the average two-year fixed mortgage rate was 5.36%, according to financial information company Moneyfacts. A five-year deal was 5.05%.
Asked on the BBC's Laura Kuenssberg show on Sunday whether “cheap” mortgage deals would ever return, Mr Nunn said: “We think they (mortgage rates) will continue to fall, but to come back At the level we've seen over the last decade, where interest rates were down to zero, I think it's unlikely.”
Mr Nunn said rising borrowing costs had been “really tough” for homeowners, but pointed out that only around 40% of UK properties had a mortgage.
He added that the average income of a family with a mortgage was £75,000, and so “many of these families have been able to absorb” higher repayments.
“Mortgage arrears, people struggling with their mortgages, have actually been falling again since December,” he told the BBC.
High interest rates can affect people in different ways. Holders of variable or tracker mortgages, or those looking to enter into new fixed-rate deals, have faced higher monthly payments.
But first home buyers looking to get into the market have found it harder to get on the ladder, as it has become harder to land an affordable deal.
An estimated 1.6 million existing borrowers are benefitting from relatively cheap fixed-rate deals that expire this year.
The UK's base interest rate, which determines the borrowing costs banks and building societies charge on loans, is currently 5%.
The rate was held at its current level last month as policymakers argued they needed to ensure inflation, which measures the rate of increase in consumer prices over time, remains at normal levels .
Mr Nunn said that although many parts of the UK “continue to struggle” due to the cost of living, 2024 marked “the turning point we have seen in the sense that most people in the country feel more financially secure.”
“For most people, the situation has improved a lot,” he said. “There are more savings in deposit accounts, there are fewer people struggling with loans and business confidence is at its highest level in nine years.”
