CML lifts 2011 lending forecast to £140bn as credit constraints ease

The Council of Mortgage Lenders has raised its 2011 forecast for gross mortgage lending by £5bn to £140bn.

In December 2010 the trade body predicted £135bn of gross lending in 2011 and net lending of £6bn.

But in its News & Views newsletter last week, it says credit constraints are starting to ease so it envisages £140bn of gross lending in 2011 and £150bn in 2012.
Alongside this it predicts net mortgage lending of £9bn in 2011 and £12bn in 2012.

The CML says lenders have made good progress in repaying funding advanced to them through the government’s Special Liquidity Scheme but availability of credit to support mortgage lending remains constrained, although it has eased.

Its forecast for repossessions in 2011 remains at 40,000 but it predicts this will rise to 45,000 in 2012.

During 2011 and 2012, the CML expects there to be 180,000 arrears cases of 2.5% or more.

In News & Views, the CML says: “Although we do not envisage a further deterioration in the overall magnitude of arrears next year, possessions may continue to nudge upwards in response to higher interest rates and stick at higher levels beyond the forecast period.”

Figures from the Bank of England last week showed both purchase and remortgages fell in April to a four-month low.

The Bank’s lending to individuals figures for April show the number of loans for house purchase fell from 47,145 in March to 45,166 in April, which was lower than the 45,878 recorded in January.

Remortgages fell from 31,201 in March to 28,091 in April, which was considerably down on the 33,179 recorded in January.

Paul Diggle, property economist at Capital Economics, says: “With falling wages and a possible rise in unemployment, we find it difficult to envisage lenders loosening the availability of credit, especially to borrowers with low deposits.

“With demand also likely to be subdued, we do not expect lending to pick up noticeably this year or next.”