The chief executive of Lloyds Banking Group has warned borrowers that a return to ultra-low interest rates is unlikely.
Charlie Nunn said the Bank of England is expected to cut the base rate from its 16 year high of 5.25 percent in the coming months.
But, speaking to Sky News, he said home buyers will not see a return of artificially low mortgage rates of 2.5 percent and below.
On home loans, he said: “Around mortgages specifically, we’ve just come off a decade where mortgages have been in the 1.5-2.5 percent range.
“The expectations the market have is that interest rates probably won’t get below 3.5 percent. And that means mortgages, or the new normal for mortgages, will be in that 3.5-4.5 percent range, not 1.5-2.5 percent.”
A number of banks, including Barclays, NatWest and HSBC, have reduced their home loan rates in recent days, potentially saving buyers £100 a month. However, the new lower rates are still typically more than 4 percent.
Mortgage brokers said the realism offered by Mr Nunn should be seen as a wake-up call for home buyers who may wrongly believe that delaying making a purchase will help them grab an ultra-low rate.
Emma Jones, Managing Director at Whenthebanksaysno.co.uk, said: “This kind of statement from a senior figure within the mortgage and banking industry is what we need more of.
“While most borrowers have accepted that a return to ultra-low rates is unlikely, and are working around today’s rates, some have not and risk waiting for something that never comes. Rates are thankfully heading down again but it’s highly unlikely they will ever return to the levels we once had.”
Katy Eatenton, Mortgage & Protection Specialist at Lifetime Wealth Management, said: “We were spoilt for too long and now’s the time to accept that rates won’t ever go that low again.
“The interest rate environment after the Global Financial Crisis was an artificial one but we are now back to reality.
“Most people didn’t take advantage and clear their mortgages early, overpay or reduce the term when rates were ultra-low anyway. They just enjoyed the enhanced lifestyle choices they could make as they had more disposable income.”
Simon Bridgland, Broker/ Director at Release Freedom, said: “The head of the biggest banking group in the country is doing what Rishi Sunak and Keir Starmer seem unable to do, namely telling the public the truth.
“Given the sway Lloyds Banking Group have with the general public, this kind of statement should hopefully get through to the die-hard hopefuls that the ultra-low rates we once enjoyed won’t be back.”
