CML: Steady improvement for 2014
However, the CML sees an unbridled housing boom as unlikely. Indeed, given the already stretched nature of household finances, the new regulatory environment and the likely future course of interest rates, housing market activity may well ease back of its own accord.
The CML is forecasting a rise in gross lending from an estimated £170bn this year to £195bn next year, and £206bn in 2015.
The CML anticipates that net advances are likely to rise from £10bn this year to £15bn next year and £20bn in 2015.
The CML anticipates that the number of mortgages 2.5% or more in arrears is likely to stay stable next year at around 150,000, but rise modestly to 160,000 in 2015.
The number of repossessions is expected to fall from around 30,000 this year to 28,000 next year before returning to 30,000 in 2015.
In terms of specific features currently influencing the mortgage market, the CML suggests that the volumes of business written under the new Help to Buy mortgage guarantee scheme may be relatively modest, “such that it has a smaller but more positive market impact than many commentators suggest”.
Bob Pannell, CML chief economist, said: “If gross mortgage lending climbs above £190bn next year, its highest level since 2008.
“While this is largely on the back of the continuing revival in housing market activity, we also expect to see a meaningful turn-round in remortgage activity.
“Despite a strong pick-up in gross mortgage lending, we have pencilled in relatively modest net lending figures – £15bn in 2014 and £20bn in 2015.
“While this would mark a climb out of the sub-£10bn doldrums, where the market has languished since the credit crunch, it does nevertheless represent a rather muted position.
“This reflects, among other things, our view that some households will use the relatively benign economic conditions to prioritise debt repayments, ahead of medium-term interest rate rises.
“We think there are good grounds to be optimistic that the vast majority of households will cope with a slow but certain transition to more normal interest rates.
“This seems to be the game-plan which the Bank of England has in mind, but presumes (as we do) that the UK avoids a destabilising housing boom over the next few years.”
The CML’s forecasts have been welcomed by the industry but cautious optimism seems to be the order of the day.
Jeremy Duncombe, director at Legal & General Network, said: “Today’s figures from the CML are undoubtedly a good sign that things are getting healthier as each month passes.
“However, there is still some way to go and we are not out of the woods yet. Some important changes are on the horizon in the mortgage market and these will inevitably have an impact as we move into 2014.
“With interest rates likely to rise in the short to medium term it’s important that borrowers prepare financially for what could be an interest rate shock.
“Unfortunately there is a chance that as rates rise, arrears and repossessions could rise alongside them and so it may be wise for borrowers to seek advice and potentially consider re-mortgaging to secure a better deal for themselves while rates remain at historic lows.
“The implementation of the MMR is also imminent and will present an opportunity for brokers as the distribution model for mortgages becomes ever more reliant on advisers.”