In an interview, Lloyds Bank CEO Charlie Nunn said already sagging British house prices will continue to fall y up to 10% this year, due to higher mortgage rates as well as the effects of the cost of living crisis on people’s pocketbooks.

On the sidelines of the World Economic Forum meetings in Davos, Switzerland, he told CNBC that the UK will experience a mild recession in 2023 as GDP falls about 0.1%. He predicted unemployment will stay strong and, “that’s more because of the constraints on the supply side, interest rates about 4% and a recovery coming into 2023.” 

He went on, “The other challenge a lot of our customers are focused on is house prices and we do see house prices softening about 8-10% this year.”

The British housing sector has been under strain since the disastrous economic plan produced by the administration of Prime Minister Liz Truss. Unveiled in September and called the mini-budget, the poorly conceived plan sent British financial markets into a tailspin as they drove up borrowing costs. The plan eventually resulted in Truss’ ouster and her replacement with Rishi Sunak.

At the same time, in order to try and rein in the double digit inflation, the Bank of England (BoE) embarked on an aggressive series of interest rate hikes. The central bank also predicted England was entering the longest recession on record.

In November, UK inflation reached 10.7% as the BoE conducted nine consecutive interest rate hikes at its policy meetings, raising the main rate from 0.1% to 3.5%. It is expected rates will continue to increase over the coming months.

The Office for Budget Responsibility (OBR) has warned Britons are facing the steepest fall in their living standards the nation has ever seen. Nunn noted that Lloyds was seeing a, “tale of two stories.”

He continued, “First of all, there is a relatively small but really important group of customers with mortgages and also without who are going to struggle to make ends meet in the cost of living. That’s about 1% of customers we can see in the UK and we really need to focus on supporting them.”

He added, “We’re seeing a much larger set of customers having to adapt their spending and adapt to both higher costs of living and higher mortgage spend, but there still is real resilience in businesses, in households and in individuals at the higher income levels in the UK and strong spending we’re seeing going through.”