Lloyds Bank’s chief executive Charlie Nunn said he thinks it is “unlikely” that the cost of mortgage borrowing will ever return to the historic lows seen in the last decade.
During an interview on the BBC’s Sunday with Laura Kuenssberg programme, Nunn (pictured) was asked if “cheap” mortgage deals would ever return.
He said: “We do think [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.”
Mortgage rates have been falling in recent months, but reductions have ceased following uncertainty over the forthcoming Budget, global unrest and mixed messages from the Bank of England. Consequently, swap rates have increased.
At the beginning of October, Andrew Bailey, governor of the Bank of England, said the central bank could be “more aggressive” in its rate-cutting cycle during an interview, which sparked hope that more base rate cuts would swiftly follow.
However, this sentiment was quickly contradicted by Monetary Policy Committee (MPC) member Huw Pill, who said the August base rate cut – which was the first reduction in over four years – had happened too early.
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Moneyfacts data shows that average two- and five-year fixed rates have risen by one basis point on the previous working day to sit at 5.37% and 5.06% respectively.
Households absorb costs
Nunn added that the increase in borrowing costs had been “really challenging” for homeowners, but pointed out only around 40% of households had a mortgage.
He said that many families had been able to absorb higher repayments, as the average family with a mortgage had an income of £75,000.
“Mortgage arrears, people struggling with their mortgages, have actually been declining again since December,” said Nunn.
