House prices falling by a third, interest rates soaring to 6%, inflation surging to 17%, and the economy going into deep recession – these are among the key elements of the latest Stress Test announced by the Bank of England on 26 September.

The UK’s largest banks are set to face a test by the Bank of England that will prove whether they can weather an economic crisis that involves UK inflation soaring and property values plummeting.

NOTE: The new stress test scenario is part of an annual exercise that is meant to weed out potential weaknesses in the banking system that could put the country’s financial system at risk. Any lenders that fall short could be forced to raise billions of pounds in capital to strengthen their finances.

The Bank of England confirmed that this year’s scenario would include the possibility of:

• UK GDP falling by 5% over 12 months
• Inflation surging to a peak of 17% before falling to 11% over the next three years
• House prices plunging 31%
• UK unemployment more than doubling to a peak of 8.5%
• UK interest rates peaking at 6%

NOTE: The Bank of England has run annual stress tests on the UK banking sector since 2013, as part of its response to the 2007 financial crisis.