Britain’s banks could comfortably withstand a slump of even a third in house prices the latest stress test on the UK financial system has concluded.
Even if unemployment rose to 12% and a house price crash of 33%, the capital position of the UK banks capital would still be above dangerous levels said the Bank of England, even allowing for Omicron outbreak.
Andrew Bailey, the Bank’s Governor, said: "The system can withstand a stress that's much larger than the stress we've seen so far.
"That is a solid result, and you can read that into Omicron."
All eight of the top banks passed the stress tests.
Analysts are now predicting a surge in payouts from UK banks to shareholders given their financial strength.
US bank JP Morgan said the banks would have waited for the stress test result before deciding on the size of any handout.
It has forecast a return of £1bn from Barclays plus a 4% dividend yield.
Lloyds is predicted to make a £1.5bn buyback with a 4% yield, while NatWest should continue to buy back the government’s outstanding stake.
Alongside the stress test, the Bank of England also said it would look into relaxing mortgage affordability rules introduced in 2014, potentially allowing house buyers to take out bigger loans.
Lenders currently are restricted in the number of high loan to income mortgages they can issue, but a current test that assesses a borrower’s ability to repay if interest rates were to rise by three percentage points might be withdrawn said the BoE