Homeowners hoping for a return to the rock-bottom mortgage rates of the last decade are likely to be disappointed, the boss of Lloyds Bank has warned.

Charlie Nunn, the chief executive of the UK’s biggest mortgage lender, said that while he expects rates to fall, they are unlikely to plummet to the near-zero levels seen during the 2010s.

This news will come as a blow to many, particularly those struggling with the current cost of living crisis.

What’s Happening to Mortgage Rates?

Mortgage rates have been on a rollercoaster ride in recent years. They shot up after the pandemic and the war in Ukraine sent inflation soaring. To try and get price rises under control, the Bank of England has been increasing the base rate – the interest rate that influences what banks charge on loans, including mortgages.

Recently, there has been some relief, with average mortgage rates dipping slightly. According to Moneyfacts, the average two-year fixed rate is now 5.36%, while a five-year fix is 5.05%.

Why Won’t Rates Fall Further?

While any drop is welcome, Mr Nunn doesn’t believe we’ll see a return to the ultra-low rates of the past. This is partly because the underlying causes of higher rates, like inflation, are still present.

However, Mr Nunn did offer some reassurance, stating that most mortgage holders are coping with the higher repayments. He pointed out that only 40% of UK properties have a mortgage and that the average income for a mortgaged family is £75,000.

What Does This Mean for You?

• Existing Mortgage Holders: If you’re on a variable rate mortgage or your fixed-rate deal is coming to an end, you’ve likely already felt the pinch of higher monthly payments.
• First-Time Buyers: Getting on the property ladder is now even tougher. Higher rates mean bigger deposits and larger monthly payments.
• Everyone Else: Even if you’re not planning to buy or sell a property, higher mortgage rates affect everyone. They can impact house prices and the wider economy.

What Can You Do?

If you’re worried about your mortgage, there are things you can do:

• Overpay: If you’re on a low fixed-rate deal, consider overpaying to reduce your debt and save on interest in the long run.
• Switch to interest-only: This can lower your monthly payments, but be aware you’ll only be paying off the interest, not the loan itself.
• Extend your mortgage term: This will also lower monthly payments, but you’ll pay more interest overall.