Lending Forecasts Downgraded for 2011 and 2012

Latest projection figures from the Council Of Mortgage Lenders reveal a more pessimistic outlook for the mortgage broker and mortgage market than previously expected,

the trade body has downgraded its forecasts for gross mortgage lending for both this year and next. The CMLs new forecasts for lending in 2011 has now been reduced to £138bn from the £140bn previously predicted.

For 2012, the trade body previously forecasted lending of £140bn has now also been slashed to £133bn, representing the weaker economic backdrop which now seems likely. The CML expects net lending to total £9bn in 2011 and £5bn in 2012. The weaker economic backdrop is also said to cause a fall in the number of housing transactions carried out next year to 825,000 compared to the slightly more positive figures previously predict of 825,000.

The CML continues to expect the current economic uncertainty to inflict negative effects into the housing market with a rise of 21.6 per cent in the number of repossessions next year. It is forecasting 45,000 repossessions in 2012, up from an estimated 37,000 this year but still fewer than the 2009 figure, due to the increased pressures on the household sector to unwind with improvements in mortgage arrears and repossessions experienced over the past two years.

Chief economist at CML, Bob Pannell said “The weak state of the wider economy and household finances creates a challenging and highly uncertain backdrop for the housing and mortgage markets.

“Despite the fact that activity levels have already been subdued for several years, we have pencilled in a broadly flat picture, for both mortgage lending and property transactions, at least until real incomes show signs of stabilising as inflationary pressures recede.”

He adds to say mortgage lenders will face challenging conditions in the wholesale funding market as a knock on effect of sovereign debt concerns and this could have negative effects on the coat and availability of UK residential mortgages through some or all of next year.