CML issues revised mortgage and housing market forecasts

The CML has today revised upwards its forecasts for house prices and mortgage lending over the next two years, in the light of a recovery in housing market activity in the second half of this year and the continuing high level of remortgaging.

Having earlier predicted that house prices would be broadly flat over the period from 2005 to 2007, the CML is now forecasting that they will rise by 4% this year.  Over the next two years, prices are predicted to rise by 2% annually.  Even though the number of property sales is expected to decline from 1.23 million in 2004 to 970,000 this year and 920,000 in 2006 and 2007, the high level of remortgaging will ensure that gross lending remains buoyant. 

But the CML emphasised that despite revising its forecasts upward, it is not expecting a new surge in house prices or market activity.  Given continuing affordability pressures, a flat outlook for interest rates and an economy that is likely to be stuck in neutral for much of the next two years, the outlook is for modest house price growth only.

Speaking at today's CML annual conference, the chairman Stuart Bernau will say:

"Just as importantly, we do not see any dramatically worsening arrears or possessions picture.  While possessions may continue to pick up modestly over the next few years, they will remain substantially below the long-term trend."

The conference will hear that, despite the positive outlook for mortgage and housing markets, government policy will play a crucial role in shaping the final outcome and delivering its aspiration that 75% of UK families become home-owners.  The industry welcomed yesterday's announcement of a shared equity initiative involving lenders, and measures to increase the supply of property over time.  But the recent Pensions Commission report failed to acknowledge the full potential of equity release in contributing to enhanced pensions in future.  And lenders remain concerned about the government's plans to introduce home information packs in June 2007.

Stuart Bernau will say:

"With so much still be settled over the next 18 months, there is a real risk that home information packs may not deliver the level of sustainable consumer benefits that the government has suggested."

Citing the contribution owner-occupation continues to make to the extension of an asset-owning democracy, long-term security and social and economic welfare, he will go on to say:

"Huge benefits have been delivered to UK consumers as a result of the activities of the mortgage industry.  We are set fair to continue this over the next few years, and build upon our successes.  But to extend home-ownership as far as possible, and fully realise its benefits, the government needs to pursue a policy agenda that helps us deliver sustainable consumer benefits." 

Notes to Editors

1.  A copy of our latest market forecasts is attached.

2.  The CML's members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the UK. There are 11.6 million mortgages in the UK, with loans worth around £942 billion.