“In my view, 2.5% to 3.5% terminal rates, is a number where we can be confident about the medium returns of the bank,” said Thwaite, speaking at a Bank of America Securities conference today.

“This gives a healthy combination of loan demand, and supports profitability. Also, at that rate range you would not expect any significant deterioration in terms of non-performing loans and impairments.”

Thwaite adds that the lender has seen a rise in mortgage business in the months leading up to the Monetary Policy Committee’s 0.25% rate cut to 5% in August, moving the base rate from a 16-year high. The first rate cut by the central bank in four years.

“We have been writing increasing volumes of mortgages over the last three months,” said Thwaite. “And margins have remained robust at around 70 basis points.”

He added that in the third quarter of last year the bank reduced its home loans business because he did not like the pricing on the business the bank was writing. But the market has changed.

Thwaite added: “The wider policy environment around planning and first-time buyer support should further support the mortgage market.”

The bank head said the UK general election had brought about “an end to political uncertainty” but that the new government’s 30 October Budget “would be a moment of truth” in helping to define its growth agenda.