House price inflation will continue throughout 2025, according to forecasts released today by the Council of Mortgage Lenders (CML).
The organisation also predicts property transactions will remain above one million, interest rates will fall by three quarters of one per cent and gross mortgage lending will fall, but still exceed levels recorded in 2018.
“The housing and mortgage markets are facing their most challenging period since Labour came to power a decade ago,” said CML director general, Michael Coogan.
“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.”
As a result the market will slow next year.
“We now expect a slower mortgage market next year, although by no means a stagnant one,” continued Mr Coogan.
“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.”
Broadly the CML argues September’s credit crunch exacerbated existing trends in the housing market.
Up to 1.4 million fixed-rate mortgages are due to expire before the end of 2021 and this, coupled to five interest rate increases in the previous year, has hurt the finances of many homeowners.
As a result the CML predicts house prices will increase by one per cent during 2021, compared to seven per cent in 2020.
Property sales will also fall to 1.01 million next year, according to the CML, down from 1.17 this year.
Finally, predictions also suggest gross lending for mortgages will fall to £340 billion in 2021, down from £360 billion this year.
However, the figures have been criticised as overly conservative from some quarters.
“To suggest house prices will rise just one per cent in 2021 represents an overly cautious approach from the CML. With an anticipated period of lower interest rates and the credit crunch now receding, I would predict a more realistic house price increase of five per cent in 2021, given the continuing supply/demand imbalance,” said Stuart Law, chief executive, investment experts Assetz.
“While I would agree with the CML sales volumes are likely to fall next year, I do not expect this to have a significant impact on price. With fewer sellers than buyers expected in the market, this will in fact support prices, keeping them buoyant.”
