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

The chief executive 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 current two- and five-year fixed rate contracts already “locked in” the coming rate cuts.

“We expect mortgage prices to remain broadly stable unless there is a material change in expectations about future interest rates,” Nunn said.

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

Lloyds Banking Group, which also owns Halifax and Bank of Scotland, expects two interest rate cuts this year. Monthly mortgage payments rose sharply as rates were raised to curb high inflation.

However, most borrowers have a fixed rate loan for the first few years of the loan, so they are not affected by changes in the bank’s interest rate and can increase or decrease their interest rate depending on market expectations.

This means that borrowers who now take out a fixed rate are already benefiting from interest rates lower than the Bank’s benchmark of 5.25%. It is unlikely that they will benefit much if the Bank actually cuts.

Nunn said: ‘There are mortgage offers these days of around 4%… so customers are already getting quite a bit for their money.’

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