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CML increases gross mortgage lending forecast for 2011

The Council of Mortgage Lenders has increased its gross mortgage lending forecast for 2011 from £135bn to £140bn.

It is also predicting gross mortgage lending of £150bn in 2012.

The trade body has also increased its net lending forecast for 2011 up from £6bn to £9bn.

It says it seems probable that the base rate will remain unchanged at its current level of 0.5% for most of 2011, before a modest progressive tightening that continues through 2012. 

It also believes lenders have made good early progress in repaying the funding advanced through official support schemes and large-scale refinancing of wholesale funding and the availability of credit to support mortgage lending remains constrained, but has eased a little.

Remortgaging activity has revived in recent months, and demand may build over the next 18 months. It says overall, the outlook is for activity in the housing and mortgage markets to remain stable.

In its News & Views, today, it says: “Housing transactions have, of course, fallen sharply since the credit crunch, averaging less than 900,000 annually over the past three years. Cash-financed sales have been more resilient over this period, however, and have therefore increased as a proportion to about a third of property sales. 

“Assuming that this continues to be the case, overall activity is likely to be at broadly similar levels this year and next. We expect the number of transactions to dip to 840,000 this year, before climbing modestly in 2012. Our forecast is consistent with mortgage-financed sales returning to about 50,000 per month in 2012.”

It has not however increased its forecast for repossessions in 2011, which it estimates will be 40,000. It does however predict this will rise to 45,000 in 2012.

It says: “Lenders will continue to work with borrowers, debt advisers and the government to manage arrears but, in a less positive economic environment, there will inevitably be cases where it is not possible to recover the situation, and where possession remains the only realistic option. The FSA has recently expressed concerns that “excessive” forbearance may be storing up future problems, and lenders will also need to be mindful of this going forwards.

“Interest rate developments will affect the ability and speed with which borrowers are able to restore their finances and also the flow of arrears cases through to possession. 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.”

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