Interest rates have peaked but will remain high until the end of next year while house prices will not rise again until 2025, says Britain’s biggest mortgage lender.
Posting a rise in third-quarter profits, Lloyds Bank predicted rates will stay at 5.25 per cent until late 2024 when they will hit 5 per cent, and said house prices will carry on falling until the end of next year.
Meanwhile, rival Santander warned that the ‘higher for longer’ interest rate outlook will hit households and businesses.
It came as bets on financial markets suggested there is a 90 per cent chance the Bank of England will leave rates at 5.25 per cent next week.
House prices: Halifax, part of Lloyds Banking Group, has reported property values are sliding
Rates have risen from 0.1 per cent in December 2021, boosting bank profits as they push up the cost of borrowing faster than they increase savings rates.
Lloyds’ profits hit £1.9bn in the third quarter, slightly above analyst expectations of £1.8bn and three times the £576m in the same period of 2022.
Its net interest margin – showing the difference between what the bank earns from loans and pays out for deposits – fell to 3.08 per cent from 3.14 per cent in the second quarter.
Meanwhile its impairment charge for potential bad loans fell to £187m from £668m last year, as fewer customers defaulted on debts.
It said house prices will continue to fall as high mortgage costs dampen demand, with a drop of 4.7 per cent this year and 2.4 per cent in 2024 before prices return to growth in 2025 with a 2.3 per cent rise.
Meanwhile, Spanish-owned Santander yesterday posted a 13 per cent rise in profits to £558m for the third quarter.
