The boss of Britain’s biggest mortgage lender has told Sky News he expects three interest rate cuts this year, bringing some relief to borrowers and mortgage holders.
Lloyds Banking Group chief executive Charlie Nunn said he anticipates rates will continue to fall gradually thanks to the resilience of household and business finances – but cautioned that the UK could expect low growth because of a relative lack of investment.
Speaking at the World Economic Forum in Davos, he said: “We think there’ll be three rate cuts this year.
“Of course, most people choose to fix their mortgage for two to five years and the pricing on that has been relatively stable and we think that stability is likely to remain for the remainder of this year.
“Those that are on the fixed rates are in a good place, and for those that are on a variable rate, their mortgage is likely to continue to come down slowly with the base rate.
“For those that are remortgaging, they are likely to get a significant uptick depending on when they set their mortgage.”
As Britain’s longest-serving bank chief in charge of the largest retail lender with more than 27 million customers, Mr Nunn is well-placed to assess consumer sentiment and economic prospects at the start of the year.
He added: “The UK economy is what I would characterise as very resilient but relatively slow growth. And that’s first of all because household finances continue to strengthen – there are some customers struggling to make ends meet and we’re always focused on them – but actually, deposits and savings in households have increased 6% year-on-year, and cash flows for many businesses again have also strengthened in the last year.
“What we haven’t yet got is investment in growth, and we still have quite a tight labour market with quite high wage inflation.”
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Mr Nunn praised Chancellor Rachel Reeves and Business Secretary Jonathan Reynolds for delivering a positive message about the UK’s prospects in Davos, where optimism about America has contrasted with gloom-consuming European prospects.
“The UK message here has been very positive,” he said. “We’ve got a sort of barbell going on, with colleagues in America being very positive post the inauguration of [Donald] Trump… while Europe is feeling quite negative in Davos, and the UK is building its own path really as a place that people want to invest.”
“The UK is well-placed, we think, relative to the rest of the world, but sentiment has been down in the last few months and people have been nervous about some of the changes that the chancellor made on taxes in the coming months.”
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The Lloyds boss was sanguine about the impact of Mr Trump’s second term, saying what counts is what he does, rather than just what he says.
“He’s one of the most predictable politicians we track, what he did on Monday this week is exactly what he said he’d do,” he said. “So there’s no uncertainty, I think, about his priorities and what he sees as important for the US economy and the ‘US first’ mindset.
“The uncertainty has always been around the execution, if he does execute, to what extent and when. Our base case for this year is that Trump will be good for the US growth, it will probably slow down the global economy if he starts to apply tariffs.”
