High levels of mortgage debt and tighter regulation could constrain the mortgage market for up to five years, Hometrack has forecast.
Hometrack has put together a range of scenarios for the mortgage market until 2015 based on mortgage debt to income ratio. This ratio compares the balance of outstanding mortgages with total annual household income.
Hometrack has calculated that if this ratio stays at 2009 levels we would see gross lending of almost £230bn a year and net lending of £50bn, compared with the £143.7bn gross lending recorded in 2009.
But Gary Styles, strategy, risk and economics director at Home-track, says that for this scenario to happen there would need to be a robust recovery in the housing market and economy, along with lighter touch regulation.
He says: “What we need is fairly relaxed regulation in a downturn and tighter regulation in an upturn but what we’ve had is the reverse.”