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Gross mortgage lending expectations may need ‘reining in’

by: Peter Williams, executive director of IMLA
  • 15/09/2015
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Gross mortgage lending expectations may need ‘reining in’
Current conditions certainly don’t lend themselves to making accurate predictions about the mortgage market – particularly for those of an optimistic disposition.

Back in December the Council of Mortgage Lenders (CML) predicted gross mortgage lending for this year would reach £220bn, which was substantially more than the £203bn total for 2014. The revision of its forecast last month is testament to just how hard it is to make calls about where the market will develop when economic conditions are so uncertain.

Interestingly, the CML’s revised forecast for gross lending was a total of £209bn in 2015 – within touching distance of the £210bn predicted by IMLA in the second instalment of its ‘New Normal’ report in spring this year. While the market has bounced back from its late 2014 slump to some degree, it is unlikely to return to its previous growth trajectory.

With forecasters increasingly erring on the side of caution – much like regulators, you might say! – the crystal ball is somewhat clouded at this moment in time. There are many events in the global economy that are able to blindside policy and market makers alike, as demonstrated by the recent troubles in China. Much will also depend on how the proposed interest rate rise plays out – the timing of which at the moment seems like anyone’s guess.

Improving economic conditions and greater adaption to the regulatory landscape should boost transactions, and mortgage approvals have been particularly strong in recent months. But wider structural problems mean that we may need to rein expectations in. The Mortgage Credit Directive will add to an already strenuous regulatory environment, and it seems likely mortgage finance will continue to decline as a share of the value of property transactions, as affordability will be stretched until housing supply issues are resolved.

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