The CML also forecasts that the number of arrears at 2.5% or more of outstanding balance at end period will stay consistent at 180,000 accounting for 1.58% of all mortgages.
The forecast assumes hesitant economic growth for the rest of 2011 as the pace of fiscal tightening intensifies and households suffer an ongoing contraction in real incomes, but a moderately more positive backdrop as we go into next year.
In regards to remortgaging activity, the CML has stated that while remortgaging activity has revived in recent months, the prospect of interest rates staying low for longer dilutes the precautionary motive to remortgage and as a result it is not expecting much of an increase in the near-term.
The CML said that while the combination of strong consumer price inflation, subdued earnings growth and fiscal cuts will undermine the financial position of many households, in recent months the employment figures have been better than expected. As a result the CML does not feel it appropriate to alter its previous forecast for 2011, of 40,000 repossessions and 180,000 arrears cases of 2.5% or more of the mortgage balance by the end of the year.
The CML, concluded: “The rebalancing of the UK economy was always going to mark a difficult and uncertain transition for households. Inflationary pressures are adding to the financial pressures many are experiencing and reinforcing anaemic economic growth in the short-term.
“But the flip side is that the Bank of England should be able to maintain low interest rates for longer, and so provide material help for those having to service debts. The prospect of low but relatively stable levels of activity in the housing and mortgage markets over the next 18 months is an unexciting one, but by no means a negative outturn given the adjustments being made in the wider economy.”
