Lloyds forecasts UK will slip into ‘mild recession’ this year

LLOYDS Banking Group has said it expects the UK to dip into a mild recession this year, as it braces for a fall in house prices and as mortgage lending continues to recover following September’s mini-budget.

The UK’s largest lender flagged an uncertain economic outlook and stressed it was focused on supporting its customers who will be “struggling to make ends meet”.

It comes as the bank increased its bonus pot for bankers to £446m last year, the highest amount dished out since 2018.

The bank laid out its forecast for the UK economy this year, which includes the Bank of England’s base rate peaking at 4%, and gross domestic product (GDP) declining by around 1.2% before returning to growth in 2024.

It also expects house prices to fall by about 7% this year, which would mean the value of average properties returning to levels seen in the third quarter of 2021.

But most of its homeowner customers would still have “very positive equity”, Lloyds said.

Charlie Nunn, group chief executive of Lloyds, said: “We are predicting what we call a mild recession – nothing like the financial crisis, more like some of the earlier recessions we had in the early parts of the century.

“For our customers, especially those at the lower-income bracket in the UK who we know will struggle to make ends meet, we are focused on supporting them.”

Mortgage lending has been gradually returning to normal levels since the former chancellor’s controversial mini-budget, which led average twoand five-year fixed-rate mortgages to temporarily surpass 6%. These levels have since begun to normalise, but still remain around 30% lower than pre-mini-budget levels, Lloyds said.