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CML view | 31
to see slightly higher transaction levels than 2009. housing and mortgage markets, and only a short-term nature of effects arising from the
However, significant house price falls over modest deterioration in the number falling reversal of this year’s VAT cuts and any post-
2008 and early 2009 mean that large numbers of behind on mortgage payments. But fiscal election increases in indirect taxes. But there are
home-owners have low or negative equity, and measures have the potential to unsettle the wider additional uncertainties, including how the US
this effectively limits both their ability and economic recovery if the tightening appears and other major economies address their major
willingness to move house and to remortgage. premature or overly aggressive. This must imbalances, and the potential these have for
Meanwhile, low mortgage rates mean that therefore be seen as a key downside risk. currency realignments and interest rate changes.
many existing borrowers find themselves on The case for a slow but progressive return to However, looking further ahead, demographic
attractively priced tracker or other variable rate more normal market conditions rests critically factors should be strongly positive for the UK
products, with little incentive to switch their on the assumption of little if any change in UK housing market, with large increases in the
mortgage. The result has been a sharp interest rates (albeit that low rates further number of 25-34s – a key age group for first-
contraction in remortgage activity (which has constrain funding to some parts of the lending time buyers – set to take place over the coming
pushed gross lending volumes lower) and industry). This seems plausible if the authorities years. This should support housing demand over
downward pressure on lenders’ margins. With and financial markets feel confident about the the longer-term.
interest rates expected to remain low, there is
little reason to expect this to change next year.
CML market forecasts - November 2009
A recovery in wholesale funding markets has
allowed large players to tap securitisation and
covered bond markets recently but investor
Residential Gross Net Arrears, 2.5% % of all Possessions % of all
capacity for UK assets is likely to remain modest
property advances, lending, or more of mortgages in period: mortgages
for some time yet. While funding markets are
transactions, £bn £bn outstanding Number
UK, millions balance at
certainly looking more healthy, the overhang of
end period:
refinancing commitments from maturing bonds Number
and government supported schemes is still likely
2007 1.613 363 108 127,800 1.08 25,900 0.22
to weigh heavily on lenders’ appetite and ability
2008 0.90 253 40 182,600 1.57 40,000 0.34
to lend more next year. Low levels of retail
2009f 0.81 141 8 195,000 1.76 48,000 0.43
2010f 0.85 150 15 205,000 1.85 53,000 0.48
savings growth also limit the flow of available
(0.7) (145) (-5) (360,000) (65,000)
This suggests that we may only see a modest
overall growth in mortgage lending volumes next
Sources: CML research, HMRC, Bank of England
year. To all intents and purposes, the UK
mortgage book is stagnating at present, with
1. Transactions are based on HMRC series for UK residential transactions valued at £40,000 or over
repayments broadly matching new lending.
2. June 2009 forecasts in brackets where applicable
3. Figures for arrears and possessions relate only to first charge mortgages held by lenders who are
members of the CML. They do not include arrears and possessions relating to other secured lending or
Taken overall, the most likely outcome for 2010
to firms that are not CML members.
is modest progressive improvement in the January 2010 Mortgage Introducer
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