Housing transactions are due to drop to just 840,000 this year, the Council of Mortgage Lenders predicts. One third will be cash transactions.
Its new forecast lowers its earlier prediction of 860,000.
The figure of 840,000 compares with 901,000 residential property transactions in 2008, 859,000 in 2009 and 886,000 last year.
The CML believes that transactions will pick up next year to 900,000. It believes mortgage financed sales will climb back up to around 50,000 a month.
It has not changed this year’s forecast of 40,000 repossessions but is predicting that next year’s repossessions will rise to 45,000.
The CML said: “Our forecasts assume hesitant economic growth for the rest of 2011 as the pace of fiscal tightening intensifies and households suffer an ongoing contraction in real incomes, but a moderately more positive backdrop as we go into next year.”
It did, however, point to growth in buy-to-let activity, with the market boosted by strong rental demand.
It also said that the ‘soft’ housing market away from London and the south-east would continue.
It added: “The aftermath of the global financial crisis continues to have a pronounced impact on mortgage and housing markets.
“This year and next, lenders need to refinance large amounts of existing wholesale borrowing and repay much of the funding advanced through official support schemes.”
It warned: “The underlying position remains challenging. Under such conditions, lenders will continue to have only a modest risk appetite, and this will limit lending at high loan-to-value ratios. Lenders’ caution is understandable in the uncertain economic environment.
“It is also being reinforced by the higher capital requirements that low-deposit loans entail and conservative lending practices that are being entrenched by the supervision of the Financial Services Authority and the uncertain outcome of its ongoing mortgage market review.”