CML revises down 2017 mortgage lending forecasts

The Council of Mortgage Lenders' lending forecasts for 2017 have been revised downwards from the previous expectations of a year ago, reflecting economic uncertainties as well as new tax burdens and regulatory changes in the housing and mortgage markets.

Related topics:  Mortgages
Rozi Jones
15th December 2016
house growth graph this is actually the green one
"Overall, the mortgage market remains resilient but is likely to plateau rather than grow much for the next couple of years."

The CML now expects gross lending of £248 billion in 2017 and £252 billion in 2018, with net lending of £30 billion in each of those years.

However, the Council stressed that the housing market is "relatively well insulated from Brexit" compared with other parts of the economy, as most activity is driven domestically.

It has reported gross lending of £21 billion in November - up by an estimated 3% on October, and also 3% up on a year ago.

However it expects buy-to-let activity to remain subdued into 2017, as stamp duty and regulatory changes weigh on activity in the buy-to-let sector. It expects 2015 to be the high watermark for buy-to-let house purchase activity, with 2016 through to 2018 all to be weaker.

It also predicts continuing weakness in the supply of homes to the market. The current rate of new-build properties is only expected to increase modestly, while the trend of few home-owners putting properties up for sale is not expected to reverse in the current climate, given high transaction costs and weak house price inflation.

However the CML says that although property transactions have been subdued through the second half of the year, it still do not expect to see national house price falls over the next two years.

CML director general, Paul Smee, said: “Overall, the mortgage market remains resilient but is likely to plateau rather than grow much for the next couple of years. Gross lending is likely to hover around the £250 billion mark in 2016, 2017 and 2018. Property transactions look set to drift down slightly, although we do not expect house prices to fall, and net lending seems unlikely to get above £30 billion next year.

“The housing market is relatively well insulated from direct Brexit effects as most activity is driven domestically, but it is not immune from more generalised economic uncertainty. And we expect any modest strengthening in home-owner lending to be rather offset by a less active house purchase market in buy-to-let, as both tax and regulatory changes bite on landlords.”

Jonathan Harris, director of mortgage broker Anderson Harris, commented: "2016 has been a tricky year with challenges presented by high stamp duty costs and the referendum outcome, and uncertainty will continue into next year, coupled with the impending changes to mortgage interest tax relief for landlords which will have a negative impact on buy-to-let.

"It is hard to see any movement in interest rates and mortgage rates are likely to be fairly settled as well. We do not expect them to rise significantly next year - while economic news will impact Swap rate movements from time to time pushing up the cost of borrowing, overall we expect the mortgage market to tick along much as it has. Borrowers will continue to need good independent mortgage advice, particularly landlords as tax changes come in from April. The challenger banks will provide a vital role, supplying the most innovative products, assisting those who are particularly struggling to get funding, such as the self-employed, older borrowers and first-time buyers."

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