However, the CML believes that activity is likely to dip this year and has reduced its forecast for total residential property transactions by 20,000 to 840,000.
Its forecast for arrears and repossessions to worsen in 2011 remains the same at 180,000 and 40,000 respectively.
In addition, the more stable forecasting environment has led it to publish in its News and Views its predictions for beyond the end of the current calendar year for the first time since the downturn.
The CML predicts that 2012 will see gross mortgage lending rise to £150bn, with net lending of £12bn and residential property transactions totalling 900,000.
While it expects the number of mortgages in arrears of 2.5% or more of the balance to remain the same, the CML believes repossessions will worsen to 45,000 for 2012.
The CML said that the UK is at a “difficult juncture” in its recovery, as households suffer falls in real income as inflation and public spending cuts take hold.
It said that the base rate will likely remain at 0.5% for most of 2011, before the Bank of England begins to progressively tighten its fiscal policy through 2012.
“The prospect of a gentler upward profile for interest rates significantly mitigates the adverse impact on household budgets of weak growth in incomes, and this will help borrowers keep up with their mortgage payments,” it said.
However, continuing weak demand means it is unlikely the UK will see a sharp fall in house prices, the CML said. It added: “With a modest recovery in household incomes anticipated next year, the housing market should develop a more positive tone in 2012.”
Mortgage funding will also ease, the trade body believes, but lenders will remain cautious despite the signs of increased competition.
Despite the lack of activity in house purchase, the CML said that demand for remortgaging will build over the next 18 months, although it does not expect significant increases in the near term given the prospect of interest rates staying low.
The CML concluded: “The re-balancing of the UK economy was always going to mark a difficult and uncertain transition for households. Inflationary pressures are adding to the financial pressures many are experiencing, and reinforcing anaemic economic growth in the short-term.
“But the flip side is that the Bank of England should be able to maintain low interest rates for longer, and so provide material help for those having to service debts. The prospect of low but relatively stable levels of activity in the housing and mortgage markets over the next 18 months is an unexciting one, but by no means a negative outturn given the adjustments being made in the wider economy.”