The CML said economic uncertainty surrounding the UK’s exit from the European Union and tax and regulatory changes in the housing and mortgage markets had forced it to forecast a more “pessimistic” figure for lending next year.
However, the CML added that the housing market was generally well protected from the risks surrounding Brexit, with most activity driven domestically.
“We expect property transactions to remain subdued going forward but, given strong demand for housing, we still do not expect to see national house price falls over the next two years,” it said.
Gross lending is forecast to reach £252bn in 2018, with net lending of £30bn in 2017 and 2018.
Despite lower expectations for the coming years, lending in 2016 is predicted to reach £246bn, £9bn higher than the CML’s forecast for the year in December 2015.
Last month, gross lending totalled £21bn, up by an estimated 3% on October and 3% a year earlier, the CML’s figures showed.
Jonathan Harris, director of mortgage broker Anderson Harris, said the CML’s revised forecast was “no surprise”.
“2016 has been a tricky year with challenges presented by high stamp duty costs and the referendum outcome, and uncertainty will continue into next year, coupled with the impending changes to mortgage interest tax relief for landlords which will have a negative impact on buy-to-let.
“It is hard to see any movement in interest rates and mortgage rates are likely to be fairly settled as well, [so] we do not expect them to rise significantly next year. While economic news will impact Swap Rate movements from time to time pushing up the cost of borrowing, overall, we expect the mortgage market to tick along much as it has,” he said.
Unsurprisingly, the CML anticipates limited or slower growth in the buy-to-let sector over the coming years, as the industry prepares for tighter underwriting standards imposed by the Prudential Regulation Authority, combined with a more unfavourable tax landscape for landlords. As a result, the CML said it expects first-time buyers entering the market to make up a large portion of net lending.
CML director general Paul Smee added: “Property transactions look set to drift down slightly, although we do not expect house prices to fall, and net lending seems unlikely to get above £30bn next year.
“And we expect any modest strengthening in home-owner lending to be rather offset by a less active house purchase market in buy-to-let, as both tax and regulatory changes bite on landlords.”