Lloyds chief says steep mortgage rate rises are over

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Lloyds’ chief government has hailed the tip of a interval of steep mortgage fee rises, saying he expects residence mortgage costs to stabilise as demand eases.

“Until there’s a materials shift in expectations round future charges . . . mortgage pricing goes to remain fairly steady from right here,” Charlie Nunn mentioned on Thursday.

Nunn was talking because the UK’s largest mortgage lender revealed its half-year outcomes, reporting that income edged up barely within the second quarter as an uptick in mortgage lending and decrease provisions for unhealthy loans helped to offset a declining windfall from larger rates of interest.

Nunn mentioned future Financial institution of England fee cuts have been already priced into present mortgage affords. Demand for home loans was “nonetheless robust” however had eased again from the beginning of the yr, when borrowing prices fell from their peak, he mentioned.

“Individuals are nonetheless actually eager to lock of their mortgage for both two or 5 years, they’re in search of that safety from rates of interest,” Nunn added.

Demand for UK mortgages rose in the first quarter of the yr after a slowdown in 2023, in response to official knowledge, as most lenders reduce their mortgage charges amid expectations that rates of interest will fall this yr.

Dwelling mortgage charges have continued to fall in current weeks, as markets anticipate the BoE will reduce its benchmark rate of interest in August or September from a 16-year excessive of 5.25 per cent. The typical fee for a two-year residential mortgage is 5.79 per cent, in response to Moneyfacts.

Lloyds reported statutory pre-tax income of £1.7bn within the second quarter on Thursday, simply above market expectations that the outcome could be broadly flat yr on yr at £1.6bn. Within the six months to the tip of June, income slid 14 per cent to £3.3bn, additionally barely larger than analyst forecasts.

Loans to clients elevated by £2.7bn in the course of the first half of the yr to £452.4bn, boosted by progress in retail lending together with mortgages and unsecured loans.

Deposits at Lloyds’ industrial financial institution, nevertheless, fell by £1.6bn within the first half, with a decline in lending to small- and medium-sized companies.

The financial institution mentioned it had put aside decrease provisions for unhealthy loans within the second quarter due to enhancements within the UK’s financial outlook. Provisions fell to £44mn within the three months to the tip of June, down from £419mn in the identical interval final yr, because it reported “resilient credit score efficiency”.

It additionally noticed a discount in new arrears and defaults throughout its mortgage e book, and “steady” arrears and default ranges in its unsecured lending e book.

Lloyds’ web curiosity margin — the distinction between the curiosity it expenses on loans and the speed it pays on buyer deposits — fell as anticipated to 2.93 per cent from 2.95 per cent within the earlier quarter.