House prices are expected to rise 17 per cent to an average of £254,000 by 2017 while gross mortgage lending is forecast to hit £212bn, up from £142bn this year, according to the report entitled “A New Normal in the Housing Market.”
Legal and General Mortgage Club managing director Ben Thompson says:“The past five years have been extraordinarily tough for the housing market, but our new report with Cebr suggests good news is on the way. We’ve hit the bottom and over the next 4-5 years we will creep back towards recovery in 2017. However, “The New Normal” represents a very different housing market to the one we have grown accustomed to in the past.”
This “new normal” forecasts higher house prices, improved disposable income ratios and lower mortgage rates although saving rates on cash ISA are predicted to present further difficulties in obtaining a deposit.
In 2017, the average house price to disposable income ratio is expected to be 5.8 per cent, compared with 6.5 per cent in 2007 as disposable income growth catches up with house appreciation.
By 2017, mortgage rates are expected to be around 3 percentage points lower than in the 2007 peak.
The average LTV ratio for first-time buyers is currently 80 per cent. Weaker earning growth and higher costs of living in the coming years is expected to contribute to a 5 percentage point rise in this average, to 85 per cent by 2017.
Between 2010 and 2019, house price growth is expected to be the weakest on record, in nominal terms, since the 1950s.