The trade body cited “strong headwinds” as the reason for its falling confidence in the market and said it expected 500,000 less property transactions than first predicted.
The CML also revised down its net lending figure from £15bn to £12bn.
It said it was hard to offer predictions with any real confidence right now, with variables like consumer confidence and the “evolving political and regulatory backdrop.”
It said: “In the next few months, we expect a continuation of the recent picture of relatively modest lending levels, with less of a pick up in the second half of the year than we previously thought.”
The market is stable, but still sitting well below what some call the “normal level of market activity” of around £250 billion.
The trade body was unwilling to make predictions into 2011, saying cut backs were unlikely to prioritise the housing market and spending cuts would have an impact.
Many factors will play against struggling borrowers, said the CML, including a possible rise in unemployment driven by the public sector cuts, the stigma attached to MPPI and the fact mortgage rescue schemes are under review.
Other issues could plague lenders too, including the end of government-lender support schemes – the Special Liquidity Scheme and Credit Guarantee Scheme – from next year onwards.
It is also hard to see how lenders will balance mortgage funding between the consumer and business markets and commercial interests could be prioritised over consumers, lowering lending figures, said the CML.
It said consumer confidence is likely to be dampened further next year as VAT rises to 20% in January and consumer spending drops.
“While interest rates look set to remain low for some time, reduced public spending and higher taxes will inevitably slow the recovery,” it said.
