While most borrowers are on fixed rate deals and are shielded from immediate changes, future mortgage rates are influenced by shifts in the base rate. Despite expectations of rate cuts, mortgage rates remain significantly higher than they were for much of the past decade. As of July 16, the average two-year fixed mortgage rate stood at 5.03%, while the average five-year fixed rate was 5.01%, according to price comparison webiste Moneyfacts. The typical two-year tracker rate was 4.91%. This means that many homebuyers and those looking to remortgage are facing much higher costs than if they had secured a loan several years ago.
Looking ahead, around 800,000 fixed rate mortgages with interest rates of 3% or below are set to expire each year, on average, until the end of 2027. Borrowers coming off these deals are expected to see a sharp increase in their monthly payments.
“We helped 34,000 first-time buyers in the first half [of the year] alone, 64,000 last year,” Nunn said. “And of course, it was driven by the stamp duty changes in Q1. So Q2 was a bit slower, but we continue to see real strength in customers wanting to buy homes and take mortgages. So we think that will continue,” said Charlie Nunn, chief executive officer at Lloyds Banking Group.
The comments follow Lloyds’ latest financial results, which showed half-year profits of £3.5 billion, surpassing analyst expectations. The bank reported increased lending and deposits, with higher interest rates boosting income from loans.
The Bank of England’s base rate, still relatively high at 4.25%, has raised borrowing costs for households and businesses. Over the past six months, Lloyds’ net interest margin — the gap between what it earns on loans and pays on deposits — has widened. The banking giant posted a 14% increase in gross new mortgage lending to £5.6 billion.