The mortgage market is forecast to grow by nearly 15 per cent next year to £195bn.
Today’s prediction from the Council of Mortgage Lenders shows how much the market’s fortunes have transformed over the past 12 months, as a year ago it predicted gross lending would fall back from £156bn in 2013 to £150bn next year.
The trade body has also today revealed it believes lenders advanced £170bn this year – some 8.9 per cent more than the £156bn it forecast for 2013 last December.
Lending is forecast to continue growing in 2015, with the CML predicting lending of £206bn.
The CML anticipates net advances to rise from £10bn this year, to £15bn next year and £20bn in 2015.
However, the CML says an “unbridled” housing boom is unlikely and lending is still low by historical standards, with gross lending still less than half of what it was in 2007, when gross lending peaked at £362bn and net lending reached over £100bn.
Table: Gross and net mortgage lending (£bn)
The CML believes the number of mortgages 2.5 per cent or more in arrears is likely to stay stable next year at around 150,000 but rise modestly to 160,000 in 2015.
The number of repossessions is expected to fall from around 30,000 this year to 28,000 next year, before returning to 30,000 in 2015.
However, the CML’s forecasting horizon covers a period when the Bank of England may consider increasing interest rates. The trade body says that while this is likely to have a greater impact from 2016, the benign period of falling arrears and possessions may be coming to an end – although it says most households will cope with the transition to more normal interest rates.
The CML suggests that the volumes of business written under the new Help to Buy mortgage guarantee scheme may be relatively modest as it does not become fully operational until January 2014.
CML chief economist Bob Pannell says: “Gross mortgage lending climbs above £190bn next year, its highest level since 2008. While this is largely on the back of the continuing revival in housing market activity, we also expect to see a meaningful turn-round in remortgage activity.
“Despite a strong pick-up in gross mortgage lending, we have pencilled in relatively modest net lending figures – £15bn in 2014 and £20bn in 2015. While this would mark a climb out of the sub-£10bn doldrums, where the market has languished since the credit crunch, it does nevertheless represent a rather muted position.
”This reflects, among other things, our view that some households will use the relatively benign economic conditions to prioritise debt repayments, ahead of medium-term interest rate rises.”