Lending is expected to total £170 billion this year, and then increase by a further 15% to £195 billion in 2014.
Activity by first-time buyers and buy-to-let investors has driven the recovery. Borrowing by movers has been slower to pick up, with some in this group constrained by the erosion of real incomes and also of equity in their current property. This combination can make it difficult for some who would like to move to make a significant step up the property ladder.
The CML said it expected remortgaging to grow in the period ahead as the prospect of higher borrowing costs begins to emerge. We are now near a historical low point for mortgage costs, but they are expected to rise only gently.
The likely future course of interest rates, combined with the already stretched nature of household finances and the new regulatory environment, means that housing market activity may well ease back of its own accord.
Gross lending is expected to grow again in 2015, rising to £206 billion. Net lending is expected to rise from £10 billion this year to £15 billion in 2014 and £20 billion the year after.
Despite the continuing pressure on household finances, mortgage arrears and possessions remain subdued, and the CML has now revised downwards its predictions for this year.
The CML said:
"We believe that the number of mortgage in arrears of 2.5% or more of the outstanding balance will total 150,000 at the end of this year, down from our earlier prediction of 160,000. We have also revised downwards our forecast for the number of mortgage possessions this year, from 35,000 to 30,000. Households are coping well, despite pressure on finances, and we do not expect a significant change in the outlook for mortgage arrears and possessions over the next two years.
"Introducing the new mortgage rules will be a major challenge for lenders next spring, and many consumers may not yet understand how they may be affected by changes in the mortgage sales process.
"The other major change next year will be the full introduction of Help to Buy from the beginning of January. The scheme is expected to give a boost to the market, but what happens to the scheme may ultimately be determined by the Bank of England.
"In recent weeks, the Bank has reinforced the message that it will intervene, if necessary, to address any risks emerging from the housing market. The Bank has an extensive range of tools, including the potential to recommend modifications to the Help to Buy scheme.
"We believe that this provides a helpful safeguard – and one that we strongly support – given that the industry does not want the Help to Buy mortgage guarantee to become a permanent feature of the market."
