The Council of Mortgage Lenders has revealed its expectations for the next two years, predicting gross and net lending of £240bn and £38bn respectively in 2016 that would represent the strongest performances since 2008.
A “gentle upward trajectory” for the mortgage market going forwards should calm macro-prudential concerns, according to the CML, while the proportion of cash-financed transactions may decline gently as mortgage availability continues to improve.
In a market outlook, published today (16 December), the CML said positive prospects for economic growth, job creation and earnings are relatively positive should underpin housing market sentiment over the next 24 months.
It also emphasised that UK interest rate expectations have eased since the summer, as more pessimistic global growth prospects have helped funding conditions and lowered inflationary pressures.
Based on the Bank of England’s latest inflation report, the CML stated that the first base rate increase may not occur until late 2015, with further increases of 25 basis points taking place roughly once every six months through to late 2017.
With strong fundamentals in place for the further expansion of the private rented sector, the council expects further expansion of buy-to-let activity, relative to gross mortgage lending and the volume of property sales, over time.
It predicted industry gross lending to climb modestly from £207bn this year, to £222bn in 2015, spread across regulated and BTL lending, house purchase and remortgage.
CML envisaged stronger growth to £240bn in 2016, as cash purchases ease back and nominal incomes growth supports resilient house prices and loan values.
“While this has helped UK lenders compete more intensely for business in recent months and will continue to support market activity over the short-term, such conditions may not be sustained, and the risks now weigh on the downside.”
The CML has pencilled in only modest growth in remortgage activity over the forecast period, as current market expectations for base rates mean that the incentives for households to refinance change only slowly over time.
“Looking ahead over the next two years, housing and mortgage market developments appear well supported by relatively favourable economic fundamentals. However, prudent and sustainable lending in the face of ongoing affordability pressures necessarily limit the further upside scope for mortgage lending,” the forecast concluded.
peter.walker@ft.com
