The Council of Mortgage Lenders has predicted that transactions will ease back in 2015 and broadly settle down thereafter.
Paul Smee, director general at the CML, told FTAdviser that the cash proportion of sales appears to have peaked at 36 per cent and is likely to gently edge downwards over the coming years.
“On the mortgage side, with house prices likely to increase moderately over 2015, lending value of house purchase will increase to £120bn in 2015, from £115bn in 2014. Remortgaging may get only modest growth in activity as current market expectations for base rates mean that incentives to refinance will change only slowly over time.
“Overall, we forecast gross lending to climb modestly from £207bn in 2014 to £222bn in 2015 with transactions of around 1.2m over the next two years. The Office of Budget Responsibility forecasts a return to longer term averages of around 1.4m, but this may be slightly optimistic given the ongoing affordability pressures facing buyers.”
Mr Smee added that the lending market appears healthier that it was a year ago, with more first-time buyer and home mover loans in 2014 than any other year since 2007, with this level is set to remain.
“There may be a softening of growth over 2015, which will further dissipate any over-heating fears, as we see a settling down of growth but one that continues the momentum of the market into a positive direction.”
The new year begins with a more stable lending industry, on the back of economic growth expectations, further job creation and a pick-up in earnings, alongside easing of worries about interest rate rises, said Mr Smee.
“There are of course challenges ahead, most notably the new regulatory additions that will be introduced and worked towards over the upcoming year may affect market performance. Consultations on the European Directive implementation are underway and making sure these align as closely with MMR as possible will aid their smooth execution.
“In addition, the Financial Policy Committee seem likely to gain new powers including the power to impose loan-to-value and debt-to-income caps. There will be a need for these powers to be exercised in an open and engaging manner with the industry, especially if the new powers extend to the buy-to-let market (as appears to be under active consideration), so not to create any unintended consequences.
Mr Smee stated that government schemes, in particular Help-to-Buy, have provided a significant boost to housing market sales and will continue to have influence.
“They currently appear to be used by those intended; mainly first-time buyers outside London. The mortgage guarantee now exceeds the equity loan aspect of the scheme, but there has been a levelling off of activity recently in both that may continue into 2015.
“Another significant factor is the announcement of residential stamp duty reform which should buoy house-buying activity in the short-term modestly, but the benefit is likely to become more limited over time.”
ruth.gillbe@ft.com
