The Council of Mortgage Lenders lowered its gross lending forecast for the year by £10bn last week, but revealed that buy-to-let lending is increasing.
It is now predicting gross mort-gage lending of £140bn for 2010, £10bn lower than its original estimate of £150bn in November 2009.
The trade body has also lowered its arrears and repossessions forecast for the year. It expects 175,000 mortgages to end the year 2.5% or more in arrears compared with its previous forecast of 205,000.
A total of 39,000 repossessions are forecast for 2010 compared with the previous estimate of 53,000.
The CML says that with remortgage activity likely to stay subdued for some time and housing turnover predicted to remain at a low level, gross lending will be substantially lower than it was in the years preceding 2007.
The trade body says that as they stand, the regulator’s Mortgage Market Review proposals could reshape the lending landscape.
It says the proposals would shrink the mortgage market, alter relationships between lenders and brokers, exclude creditworthy potential first-time buyers and prevent existing borrowers from moving or remortgaging.
Meanwhile, the CML says there was a 13% rise in the number of buy-to-let mortgages taken out in Q2 2010. A total of 24,900 buy-to-let mortgages were taken out compared with 22,000 in Q1 and 21,600 in Q2 2009.
The value of buy-to-let lending in Q1 was £2.4bn, of which £1bn was remortgaging.
Michael Coogan, directorgeneral of the CML, says: “Funding conditions for lenders remain tight but there’s every reason to expect the buy-to-let sector to continue to make a powerful contribution to meeting the UK’s housing needs.”
Paul Diggle, property economist at Capital Economics, says: “With many would-be first-time buyers frustrated by lenders’ deposit requirements, there is ample tenant demand.
“But after tax and running costs yields remain low and with the looming fiscal squeeze likely to put the pressure on wages, any rise in returns will be slow.”