The lenders’ body expects gross mortgage lending to exceed £170bn in 2013, before climbing to £195bn in 2014 and hitting £206bn in 2015. If the forecast is correct, gross mortgage lending will be at its highest levels since 2008.
At the same time, the CML warned the tighter affordability criteria introduced in the run up to the Mortgage Market Review will prevent “the irrational exuberance” of previous housing market booms.
Remortgage levels are recovering from a 15-year low, the forecast said, while a rise in selling prices is expected to encourage more homeowners to move. The Help to Buy schemes are predicted to assist a small proportion of first-time buyers.
The CML said a more resilient jobs market and better access to credit has boosted the housing market. “There is a strong consensus about the immediate direction of travel for the housing market, but little agreement as to its eventual destination,” the report noted.
On interest rates, the lenders’ body said today’s market is “as good as it gets”. It expects the Bank of England to maintain a policy of low interest rates for the next two years. This is anticipated to help maintain the trend of falling arrears and possessions through 2014.
The forecast was broadly supportive of the government’s Help to Buy schemes. While boosting market confidence, it noted the Help to Buy mortgage guarantee scheme is yet to have a material impact for borrowers.
It stated: “There is a possibility that too much importance has been ascribed to the impact of the Help to Buy mortgage guarantee scheme.
“While it brings forward a return to higher LTV lending, and so eases the position of those looking to purchase or move home under their own steam, it seems likely to directly help a relatively narrow profile of buyers, given the new regulatory regime.”
The CML said it supports the plan to review the Help to Buy scheme each September: “Our industry does not want the mortgage guarantee scheme to become a permanent feature of the market.”
The forecast
Mortgage lending
• Gross mortgage lending to exceed £170bn in 2013, climb to £195bn in 2014 and reach £206bn by 2015
• Remortgaging will pick up, with activity expected to rise to levels last seen in 2009
• Mortgage Market Review will have a “modest” short-term effect on lending patterns
Housing market
• Property transactions and house price growth may peak in 2014-15 due to affordability constraints
• Improvements in selling prices will boost the number of home movers
• The Bank of England is likely to keep interest rates low for another two years
Help to Buy
• Volumes will be lower than the hundreds of thousands some commentators have predicted
• Help to Buy 2 likely to appeal to borrowers who are older and higher earners than the typical first-time buyer
• The scheme could push house prices up in the short-term
