It acknowledged the BoE’s prediction that the longer prices continue to rise rapidly, the greater the chance of a sharper correction to the housing market. However, it stated that the combination of affordability constraints and the expected small increases in interest rates will produce a soft landing for the housing market.
Michael Coogan, director general of the CML, said: "The growth of house prices has been much stronger and lasted longer than we expected. But it clearly cannot continue at the current rate indefinitely. We expect the monetary policy committee to move on interest rates sooner rather than later. An early increase in the base rate would help to rein back the growth in consumer spending. Expectations of higher interest rates would also dampen conditions in the housing market and a little pain for borrowers now will help avoid the need for a more severe remedy later on.
"Although affordability is becoming more of an issue for buyers, low interest rates have ensured that mortgage payments remain a relatively low proportion of income. Borrowers should remember that even if interest rates do rise, the outlook is for much less volatility in rates than we have seen in the past. For the vast majority, mortgages will remain affordable as prices begin to slow and the housing market moves on to a sounder footing for the future."
