In an interview with Money marketing, Cutter says the UK savings market is highly competitive, and this is magnified by the presence of guarantees given to nationalised banks.
He says: “The UK retail savings market is highly competitive and there is a distortion caused by the implicit guarantee given to the nationalised or part-nationalised banks.
“And as long as interest rates remain so low, and the disconnect which now exists between average cost of retail funds and base rate remains, if people want to remain competitive in the retail savings market then they need to pay for that by earning a desired return on your mortgage assets.”
Cutter adds that if the base rate remains at a record low level, other lenders may be forced into following suit.
He says: “It is not for me to predict how other lenders will react, but if base rate does remain low for a considerable time, and if competition in the retail sector remains extensive, then there will be pressure to raise mortgages.”