Lloyds has predicted that house prices could fall by 10%, coupled with 20% falls in commercial values.
The lender’s base case scenario is that UK house prices will fall 6% this year, worse than the 5% it predicted at the end of April.
Even in an upside scenario, it believes house prices will fall by 3.7%, before recovering in 2021.
In Lloyds’s severe downside model, prices could fall as much as 9.5% this year and 29.2% by 2022.
The outlook is bleaker for the commercial property sector. Lloyds’s base case scenario has forecast a 20% drop in prices this year, down from its forecast of a 15% decline three months ago.
In an upside scenario prices are expected to fall by 8.4%, before recovering next year. In a severe downside scenario, it predicts that prices could fall by as much as 36.2% this year and 41.9% by 2022.
The bank has put aside £2.4bn to account for bad debts resulting from the pandemic, resulting in it announcing a £676m loss for the second quarter.