CML Predict 2003 House Prices
The housing market is more likely to experience a soft landing than a sharp shock, according to forecasts for 2003 and 2004 published today by the Council of Mortgage Lenders, as members of the CML gather for their annual conference. But the CML warns that this outcome is less than certain, not least because the recent behaviour of the housing market has itself taken the experts by surprise.
The CML expects house prices to end 2003 nearly seven per cent up on the corresponding period in 2002, a much lower rate of increase than the 23% anticipated for 2002. However, it is possible that double-digit price rises may persist until well into 2003. The CML forecasts gross mortgage lending to increase a little, from £215 billion in 2002 to something in the region of £225 billion in 2003. This figure is likely to be buoyed by continuing strong levels of remortgaging, expected to account for well over a third of all lending. As a result, the CML expects net lending to fall slightly next year.
Although this is the CML's central forecast, there is a risk that the housing market may suffer a sharper correction if the global downturn is more protracted than expected and puts greater pressure on UK jobs. However, even if this happens the CML would not expect any correction to be anything like as severe as in previous cycles, primarily because the threat of interest rates reaching the levels that they did last time is extremely unlikely.
Commenting on the outlook for the housing market, CML Director General Michael Coogan said:
"We do not expect house prices generally to fall, but we do believe house price inflation will slow down markedly as affordability constraints kick in and interest rates rise modestly later in the year. While we do not expect too many problems in the housing market, now is not the time to borrow on the assumption that house prices will continue rising at their current rate forever."