House price inflation is likely to remain positive, property transactions are set to remain above one million, interest rates are set to fall by 0.75%, and gross lending will decline but is still set to exceed 2005 levels, according to the Council of Mortgage Lenders’ (CML) 2008 housing market forecasts.

In summary, the CML has forecasted house prices to rise by 7% in 2007 as a whole and 1% in 2008, property sales to total 1.17m in 2007 and 1.01m in 2008, gross lending will reach £360bn in 2007 and £340bn in 2008, net lending will total £105bn in 2007 and £90bn in 2008, the number of arrears cases of over three months will reach 145,000 (1.22% of all mortgages) by the end of this year and 170,000 (1.42% of all mortgages) by the end of next year, the number of repossessions in 2007 will total 30,000 (0.25% of all mortgages) in 2007 and 45,000 (0.38% of all mortgages) in 2008, and lastly base rates will end this year at 5.5% and will decrease to 5% in 2008.

Michael, Coogan, CML director general, said: “The housing and mortgage markets are facing their most challenging period since Labour came to power a decade ago. Luckily, the credit crunch occurred at a time when the UK economy was robust, but even so the effects on the financial sector are significant, and the mortgage market is not immune from them.
“We now expect a slower mortgage market next year, although by no means a stagnant one. Most borrowers will cope, but not everyone will escape unharmed from the effects of a slower market, so the government should make it a policy priority to overhaul the system of state support for home-owners, which has lagged pitifully behind the times.”