CML expects house prices to grow by 7 percent in 2006

CML expects house prices to grow by 7 percent in 2006

	Published : Thu, 08 Jun 2006 12:55 By : Cedric Benson Print this Story

LONDON - The Council of Mortgage Lenders has said that house prices in the UK are set to grow by 7 percent in 2006. This is at least three times higher than the prediction of 2 percent made in February this year. But the CML also warned that the increasing rates in the housing market would also allow the Bank of England to raise the interest rates.

"The immediate signs are that demand will remain robust over the next few months, but we take the view that confidence and activity are closely associated with interest rate movements and expectations," said Jim Cunningham, CML senior economist. "The small rise in short-term interest rates expected in the second half of this year and the rise in fixed-term rates that we have already seen is likely to result in a modest fall in the level of transactions in the second half of this year, and we expect this to continue into 2007."

The group said that 1.2 million properties would be sold and brought this year as against the 970,000 predicted in February. Mortgage lending is also expected to be robust with £310 billion being advanced. This figure is 9 percent more than the February one. Net lending was forecast 25 percent higher at £100 billion. The costs of borrowing are now slated to be 4.75 percent in 2006 and 2007 up from the 4.5 percent. But CML still expects the housing market to weaken in 2007.

CML said that 130,000 people would fall behind on their mortgage payments by the end of 2007 and 15,000 people would have their homes repossessed in the same period. This is up from the 12,000 predicted earlier. Mr Cunningham said that prospects were looking bright fro 2008, when low inflation should see reduced interest rates, "This in turn should support demand from home-buyers and buy-to-let investors and result in firmer house price growth," he said.