However, the outlook for net lending appears less negative than previously forecast, and the CML now expects net lending to fall by only around £5 billion, compared with the £25 billion contraction previously anticipated.
While conditions in the housing and mortgage markets remain extremely challenging, existing borrowers are gaining some significant benefits from the effect of lower interest rates. This factor, taken together with the significant levels of forbearance being shown by lenders and the government's interventions to improve support for some struggling home-owners, has resulted in the CML reducing its forecast for repossessions for this year from 75,000 to 65,000. The CML now also expects around 360,000 mortgages to be in arrears, equivalent to 2.5% or more of the mortgage balance by the end of the year.
The CML observes that: "The raft of measures taken by the authorities have stabilised the economy and will sow the seeds for a recovery over time, including in the housing market. But the improvement is likely to be slow and drawn out, especially as the extensive fiscal, monetary and credit support measures are gradually unwound."
