Gloomy CML cuts lending forecasts for this year

The Council of Mortgage Lenders cut its forecasts for lending this year to be at, or below, last year’s low levels, and said transactions would be at below one million.

It says that the recovery in the housing market has run out of steam, with prices stagnating and a tailing-off in cash buyers who provided a short-term boost in the last half of last year.

It has taken £10bn off its gross lending forecasts for this year – now forecasting £140bn, not £150bn. Normal market activity is £250bn.

It has also shaved its net lending forecast, originally made last November, from £15bn down to £12bn.

The CML is expecting under a million transactions at 900,000, roughly the same as last year, which was a postwar low in housing transactions. The CML expects transactions to remain low for some time. In 2007, there were 1.613m housing transactions.

The CML also warns of choppy waters ahead, saying there are risks and uncertainties for next year. Austerity measures will “inevitably” dampen the housing market.

It also says the ending of the Government’s official support scheme to lenders will result in “disruption to funding availability” as lenders struggle to refinance their wholesale assets. This will constrain the supply of lending, whilst tighter mortgage regulation may make it harder for borrowers to find funds.

The CML goes so far as to say that the impact of the Financial Service Authority's Mortgage Market Review and the new ‘sensible lending’ regime could have extremely serious ramifications.

It warns: “As the proposals currently stand, they could permanently restructure the lending landscape, shrinking the mortgage market … excluding some credit-worthy first-time buyers and preventing some existing borrowers from moving or remortgaging, as some product types are removed from the market permanently.

“The cumulative impact remains to be assessed but, even at this early stage, we think this will have a significant impact on borrowers’ housing choices in the future. Fewer will be able to become home owners if the current FSA proposals proceed."