Banking sector ‘resilient’ to house price shock 

Mortgage borrowers are facing higher costs but banks are ‘resilient enough’ to withstand a 30% fall in house prices, the Bank of England said yesterday.

The latest stress testing data from the central bank suggests 87% of the stock of owner occupier mortgages are below 75% loan-to-value, “providing a sizeable buffer against significant house price falls.”

The Bank of England’s financial stability report, also released yesterday, did highlight the extra cost pressures on borrowers though.

It showed that millions of mortgage borrowers could see their monthly repayments rise by around £220 by the end of this year.

Longer term, more than two million are set to pay between £200 and £499 extra per month by the end of 2026 and a further one million could to see at least an extra £500 in costs.

Hundreds of thousands could also end up paying around £1,000 extra per month, according to the report.

The report, from the bank’s Financial Policy Committee (FPC), estimated that the proportion of post-tax income spent on mortgage payments will increase from 6.2% to around 8% by mid-2026.

The FPC said this  would remain below the peaks seen in both the 2008 global financial crisis and the early 1990s recession.

It said: “The FPC judges that the UK banking sector is resilient to its mortgage exposures, including in the event of house price falls significantly in excess of external central case projections.”