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CML Forecast 16% Mortgage Lending Growth In Next 2 Years

CML Forecast 16% Mortgage Lending Growth In Next 2 Years

Council of Mortgage Lenders Predict Significant
Mortgage Lending Growth

The Council of Mortgage Lenders (CML) have predicted that gross mortgage lending in the UK will increase by 16% over the next two years.

The CML says gross mortgage lending in the UK reached around £207 Billion (GBP) in 2014 and they firmly believe that gross mortgage lending will grow by 7% to £222 Billion (GBP) during 2015.

Following that, the CML also forecast a further 8% increase to £240 Billion (GBP) in 2016, up 16% when compared to gross mortgage lending in 2014.

While the CML are happy to forecast 2 years of mortgage lending growth, it acknowledges that the pace of growth has slowed compared with the 18% recorded from 2013 to 2014, with gross mortgage lending increasing from £176 Billion (GBP) in 2013 to £207 Billion (GBP) in 2014.

In its analysis, the CML said that the stamp duty reforms announced by the Chancellor, George Osborne, in the Autumn budget would help boost overall mortgage lending activity, following the lull encountered in the summer of 2014.

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Bank Of England Governor Hints At Earlier Base Rate Hike

Bank Of England Governor Hints At Earlier Base Rate Hike

Is Mark Carney Eager To Raise Interest Rates?

The Governor of the Bank of England (BoE), Mark Carney, has drawn further criticism from economists after giving another mixed signal on the timing of any base rate increase away from the current historic low.

In an interview with the Sunday Times newspaper Mr Carney took great care to big up the health of the nation’s economy and insisted that the Bank of England would not wait for employed peoples wages to catch-up with the cost of living before hiking interest rates.

Mr Carney told the Sunday Times: “Wherever the finish line was in the depths of the crisis, we are much more than halfway towards that finish line now. The expansion is proceeding, momentum is more assured. The very fact we have had consistent quarters of growth in line with, or slightly better than, our forecasts shows that. We have to have the confidence that prospective real wages are going to be growing sustainably, before raising interest rates, we don’t have to wait for the fact of that turn to raise them.”

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New research from the Centre for Economics and Business Research (CEBR) shows UK property prices rising by 0.8% in 2012.

CEBR confirm a view that has remained fairly consistent for the last 3 years, that low interest rates and an increasing availability of mortgage products suitable for First Time Buyers (FTB’s), next time buyers and Buy To Let Landlords will help UK residential property prices creep up over the 2012-2016 period, reaching pre-recession levels in the second quarter of 2016.

The CEBR based its forecasts on a mix of micro and macro factors.

  • The key micro factor is the shortage of housing relative to potential household formation.
  • The key new micro issue is the changes in the planning regulations re-announced in the Budget.

These are likely gradually to boost the supply of housing and will constrain the gentle rise in house prices.

The key macro factors are

  • Affordability
  • Employment
  • Mortgage availability

The first of these will be slightly positive, the second slightly negative and the third increasingly positive.

The CEBR expect the mortgage famine to ease gradually as further quantitative easing flows through the economy and as banks recapitalise themselves.

“House prices have been pretty stable over the past two years” says Shehan Mohamed, main author of this report “Lending for housing was £74.5 billion in 2011 and we forecast that this will rise to £109.9 billion by 2016”.

CEBR’s regional house price analysis, also included in the report, shows house prices are likely to continue to rise more quickly in the London and the South East, though the gap in house price inflation with the rest of the country is likely to close because of the 7% stamp duty and the heavy taxation on corporate home ownership announced in the Budget and because of the non-recurrence of special factors like the Arab Spring and the euro crisis which boosted the London market in 2011.

Following the gloomy post I made on 31st Aug “UK Home Ownership Set For Decline”

There is a sort of upbeat flip side to the same story as reported in the national media 

Property prices are set to soar by 21.3% by 2016, according to economists.

In what is hailed as “fantastic” news for the property market, the average value of a home in England is expected to rise from the current £214,647 to £260,304 within the next 5 years.

This news comes after property asking prices rose by 1.3% in July, the biggest monthly jump since January 2010.

According to research by Oxford Economics for the National Housing Federation, the shortage of housing, combined with rising rental demand will drive the next property boom, with house prices rocketing by more than a fifth in just under five years.

The new report stated that over the past year, only 105,000 new properties have been built across the UK – the lowest level since the 1920s.

This is less than half the number needed to meet the current demand.

The predicted boom in property values will come as welcome relief to homeowners, many of whom have battled with negative equity since the start of the recession.

If the findings of the report are to be believed then all regions of the country should see an increase in property prices.

7% of home owners currently owe more than their property is worth, according to the Council of Mortgage Lenders, (CML).

In some parts of the country this figure is actually as high as 16%.

Stephen Dyer, managing director of Ideal Property, said the forecast was “fantastic news for homeowners. These projected figures are massively positive and they are from a credible source so it’s great news that they think house prices will rise by so much. It is an absolutely fantastic forecast. Some people will find these predictions very hard to believe given the current economic situation and the fact that the housing market is still struggling, but this report is looking at more than just this year. There are not currently a lot of new houses being built so there’s competition for the properties that are on the market already. That means house prices will rise. It is just a matter of time. Lending will also free up at some point. When that happens, which it will, and when more people start becoming more confident about the market, which they will, there will be a significant improvement. Many people have seen huge sums wiped off their pensions because of the stock market crash, so this will be very welcome news.”

Housing Minister Grant Shapps said: “The trebling of house prices in the 10 years from 1997 has locked too many out of owning their own home. We need to get Britain building again. That’s why I’ve announced plans to release thousands of acres of public land. Despite the need to tackle the deficit we inherited, this government is putting £4.5billion towards an affordable homes programme, set to exceed our original expectations and deliver up to 170,000 new homes over the next four years.”

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