Mortgage Borrowing Will Flatline in 2012, Predict Lenders

Mortgage Borrowing Will Flatline in 2012, Predict Lenders

16:14 PM, 15th December 2011, About 13 years ago

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Buy to let borrowers can expect the mortgage drought to continue throughout 2012, according to lending forecasts from banks and building societies.

Funds for mortgages are likely to flatline for the next year, says the Council of Mortgage Lenders, the trade body of major mortgage lenders.

Forecasts for buy to let lending are not separated from gross mortgage lending by the CML, but in 2011, several lenders have diverted funds from residential lending to landlords as margins on the loans has given them a greater return.

Uncertainty in the economy and market volatility are cited as the major reasons for the conservative prediction.

The CML also expects around 25,000 fewer home sales in the year as the market tightens.

More homeowners are expected to fall behind with their mortgages as job losses and spending cuts begin to bite.

The forecast is for 45,000 repossessions next year, up from an estimated 37,000 this year, but still fewer than than in the downturn of the 1990s, says the CML.

CML chief economist Bob Pannell said: “The weak state of the wider economy and household finances creates a challenging and highly uncertain backdrop for the housing and mortgage markets.

“Despite the fact that activity levels have already been subdued for several years, we have pencilled in a broadly flat picture – for both mortgage lending and property transactions – at least until real incomes show signs of stabilising as inflationary pressures recede.”

He also warned mortgage interest rates might rise as the markets deal with the Eurozone sovereign debt crisis.

“As a by-product of sovereign debt worries, lenders face challenging conditions in wholesale funding markets, and these could have negative effects on the cost and availability of UK residential mortgages through some or all of next year,” he said.

“If European leaders navigate a comprehensive and sustainable way through Eurozone problems, current financial market stresses could heal – and the previous pattern of gradual improvement in cost and availability of funds re-emerge – relatively quickly. This in turn could have a major benefit on UK growth prospects, and boost household confidence and appetite to borrow.”

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