Lloyds boss: ‘Don’t expect cheap deals as interest rates fall’

The boss of Lloyds, Britain’s biggest mortgage lender, has warned borrowers not to expect cheaper deals if the Bank of England cuts interest rates.

Chief executive Charlie Nunn said the two- and five-year fixed-rate deals currently available had already “cemented” the coming cuts.

“Our expectation is that unless there is a material change in expectations about future interest rates, mortgage prices will remain fairly stable,” Nunn said.

Markets are betting that the probability of a rate cut at the Bank of England meeting next Thursday is 50/50.

Lloyds Banking Group, which also includes Halifax and Bank of Scotland, expects two rate cuts this year. Monthly mortgage payments have risen sharply as rates have been raised to control high inflation.

But most borrowers have agreements set at a fixed rate for the first few years of the loan, so they are not affected by changes in the bank’s rate and go up and down depending on market expectations.

This means borrowers who accept fixed deals today already enjoy rates below the Bank’s benchmark of 5.25%, and are unlikely to see much benefit when the Bank cuts them.

Nunn said: “There are mortgage deals around 4% these days… so customers are already getting significant value.”

Lloyds reported a 14% drop in pre-tax profits to £3.3bn for the first half.