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Lloyds Bank CEO, Charlie Nunn, has said it is “unlikely” that the cost of borrowing money to buy a home will return to the low levels seen over the past decade. While the bank expects mortgage rates to continue to come down, this reduction is unlikely to reach the near-zero rates observed during the 2010s. Nunn’s comments follow the rise in the rate charged on new fixed mortgage deals in recent years, as a result of an increase in interest rates to try to slow soaring price rises caused by the COVID-19 pandemic and Russia’s invasion of Ukraine.
Lloyds Bank’s position contrasts with the recent prediction of KPMG’s Economics team. According to their predictions, today’s record-low levels of interest could be “around for longer” than current estimates suggest, indicating that borrowers could enjoy low rates for the medium-term future. In their report on the outlook for the UK property market, KPMG states that the factors suppressing the UK’s economic growth since the 2008 financial crisis, such as low demographics, the rise of platforms such as Airbnb, and environmental issues, could place downward pressure on property prices and ensure that interest rates stay low.
Nunn acknowledged that the hike in borrowing costs had been “really challenging” for homeowners. Still, he pointed out the positive news that only about 40% of UK properties have a mortgage. He also mentioned that the average income of a family with a mortgage was £75,000 and that “many of those families have been able to absorb” higher repayments.
While high-interest rates affect people in different ways, mortgage holders with variable or tracker mortgages or those looking to secure new fixed-rate deals have faced higher monthly payments. Priced-out first-time home buyers looking to get on the market have found it more challenging to secure an affordable deal. However, Nunn indicates that most parts of the UK are “continuing to struggle” due to the cost of living and that 2024 has marked “the turn that we have seen in terms of most people in the country feeling more financially secure
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