A fall is typically expected from March to April. However, the fact that Easter was in March is likely to have affected the monthly profile this year. For March and April combined, lending was down 16% from 2007 levels.
The CML has also updated its housing market forecasts for the rest of 2008. In brief, the CML now expects:
• House prices to be around 7% lower at the end of the year than at the end of 2007;
• Property transactions in England and Wales to be around 35% lower than last year at 770,000;
• Gross lending to be around 21% lower than last year at £285 billion;
• Net lending to be half last year’s level at £55 billion; and
• Bank base rate to end the year at 4.75%.
The CML’s detailed forecast, while clearly anticipating a sharp slowdown this year, does hold some crumbs of comfort. With many borrowers now experiencing lower rates, and with those coming off fixed rates on to higher rates so far appearing to manage the adjustment well, the CML’s outlook for mortgage arrears and repossessions remains unchanged.
CML director general Michael Coogan commented: “In the wake of the credit crunch, 2008 will be remembered as a very weak year in the housing market. But our forecasts assume some indirect benefits from the Bank of England special liquidity scheme beginning to have an effect in the mortgage market in the later part of the year.
“Over the next few months, lending volumes will get worse before they get better. The market is still very uncertain, but lenders are working hard to ensure that borrowers coming off fixed rates remain on track, that arrears and repossessions are minimised, and that pricing is as attractive as they can make it in a market where they must manage the demand for lending with caution.”
