Mortgage rates between 3.5% and 4.5% will be the “new normal” even after base rates begin to fall, says the head of the UK’s biggest home loan lender.  

“We have just come off a decade where mortgages have been in the 1.5% and 2.5% range,” Lloyds Banking Group chief executive Charlie Nunn told Sky News.  

“The expectation that markets have is that interest rates won’t get below 3.5% — and that means that the new normal for mortgages will be in that 3.5% and 4.5% range.”  

Nunn warned that these rates will not come to market until the Bank of England begins a series of base rate cuts.  

The base rate has remained at a 16-year high of 5.25% since last August. The last time the central bank cut rates was in March 2020.    

Money markets had hoped the first cut would come as early as the spring, but many economists have now pencilled in a first cut in November.  

The central bank’s rate-setting Monetary Policy Committee voted 7 to 2 to hold the rate earlier this month, even though inflation returned to its 2% target in the year to May.  

The committee cited concerns over wage growth at 5.9% and services inflation at 5.7% as two key reasons for holding the base rate.  

Nunn added: “There is going to be a higher cost of borrowing in the economy, probably based on what we can see happening at the moment.  

“In terms of the impact on the broader consumer in the UK, it’ll take longer to feed through.  

The bank head pointed out that 10-year thinking around housing and planning is an important feature of “unlocking” UK growth aming domestic firms and international investors.  

He says that investors are looking for “stability and a plan” from the next government, adding that there have been some “good discussions” among political parties “around planning, around connectivity to the grid and around skills”

Lloyds Banking Group owns several major mortgage lenders, including Halifax and Birmingham Midshires.