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30 | CML view
Slow and
steady
The Council of Mortgage Lenders (CML) believes there are
positive signs for 2010 but it will be a long recovery
here have been some more positive authorities worldwide have underpinned the Rising unemployment, and the lagged impact
T
signs in recent months, both from financial system. But against the backdrop of a of earlier increases, will mean that more
the economy at large and the marked improvement in the global economy, the borrowers fall behind on their mortgages. But the
housing and mortgage markets. UK has been slow to emerge from its worst post- increase is now only expected to be modest due
The unprecedented raft of support war recession, and remains vulnerable to any to the off-setting effect of low interest rates. The
measures, taken by authorities in future adverse shocks. number of borrowers behind by 2.5% or more of
the UK and globally, have While the jobs market, helped by widespread their mortgage was forecast to be 195,000 at the
underpinned the financial systems and we are pay moderation, has performed better than end of 2009, unchanged from the end of the
now likely to be moving out of recession, at least expected, unemployment is still likely to peak at third quarter, and edge up to 205,000 by end-
in a technical sense. There is a general sense that or near the three million mark in 2010. The 2010.
the worst has now been avoided and we are now number out of work may now peak rather lower Possessions too have been much lower so far
more positive on the outlook than a year ago. and earlier than had been feared, but will still than we feared earlier, although numbers may
The exceptionally low level of rates has made it weigh on the housing market. continue to rise as borrowers with longer-lasting
easier for many borrowers suffering payment Many commentators, including the Bank of causes of financial hardship run out of options.
problems to manage their situation. While the England, expect our recovery to be protracted Under the assumption that interest rates remain
weak labour market will continue to exert and relatively weak. Once the general election is low and government support measures are
pressure on mortgage arrears, we expect only a out of the way, we will likely see a process of maintained at current levels, we expect a
small rise in arrears and possessions from here fiscal retrenchment, comprising spending cuts relatively modest increase in the number of
through to the end of 2010 - a considerably and tax rises, that will persist for several years at possessions from 48,000 in 2009 to 53,000 in
better outcome than we had expected. least. 2010.
But, although there have been definite signs of However, the upside to a relatively sluggish
improvement in recent months, housing market economic recovery is that monetary policy is Housing and mortgage
activity is still considerably lower than what likely to remain loose for some considerable time markets
might be considered normal. And we are unsure with little pressure on the Bank of England either The strength of the housing market over recent
of how far the recent improvement can continue. to increase official interest rates or reverse QE months has been surprising. Recovering house
While there have been signs of life in the through next year. prices appear at least partly to reflect short-term
wholesale funding markets, overall funding drivers, such low volumes of new-build
conditions remain challenging. A weak labour Mortgage arrears and properties, few willing sellers, and a relatively
market backdrop and equity constraints make possessions high level of cash and overseas buyers. It is not
forming chains difficult, so it is hard to envisage One consequence of economic weakness has certain that these will continue into 2010. Sales
housing transactions rising much above current been low mortgage rates and the beneficial activity has picked up sharply from the very low
levels for some time. With limited ability and impact on mortgage arrears. Our initial forecast levels seen early in 2009, but remains far below
little incentive to refinance, overall lending for 2009 has proved far too pessimistic. Low rates what might be considered “normal”. House
volumes will remain subdued during 2010 - have meant fewer households falling into arrears purchases for 2009 as a whole are set to be lower
albeit at slightly higher levels than in 2009. as a result of temporary disruption of incomes, than in 2008 and likely to be the weakest since
and a much greater range of forbearance and the war. It is hard to build a case for a dramatic
Economic backdrop other coping strategies for those who face upturn until the wider economic picture
The unprecedented support measures taken by payment difficulties. improves materially, although we do expect 2010
January 2010  Mortgage Introducer www.mortgageintroducer.com
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