The Chief Executive of Lloyds Banking Group – the UK’s biggest lender – has warned borrowers that a return to ultra-low interest rates is unlikely.

Charlie Nunn told Sky News yesterday that while interest rate cuts from the Bank of England expected later this year would be ‘beneficial’ homeowners shouldn’t expect a return to ultra-low interest rates.

LONGER TO FEED THROUGH

He told Sky’s Business Presenter Ian King: “In terms of the impact on the broader consumer in the UK, it’ll take longer to feed through. Around mortgages specifically, we’ve just come off a decade where mortgages have been in the 1.5-2.5% range.

“The expectations the market have is that interest rates probably won’t get below 3.5%. And that means mortgages, or the new normal for mortgages, will be in that 3.5-4.5% range, not 1.5-2.5%.”

Emma Jones, Managing Director at Whenthebanksaysno.co.uk, told the Newspage news agency: “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.”

GOOD OLD DAYS ARE OVER

And Andrew Montlake, Managing Director at national mortgage broker Coreco, adds: “For the most part, borrowers in our experience have readjusted to the new rate environment and know that the good old days of artificially low rates are over.

“Borrowers are more relieved that rates will no longer rise to 6% than hopeful that they will fall to 2%-3% again.”

He adds: “That said there is an expectation that rates will fall over the next six months but this is more likely to be at a glacial pace and buyers have to weigh up waiting for a slightly lower rate that may not appear or risk losing out on their dream home as house prices increase.”