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Flat year ahead for the mortgage market

Flat year ahead for the mortgage market

Category: Mortgages

Updated: 19/01/2011
First Published: 19/01/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The mortgage market is predicted to remain flat in 2011, following a difficult 2010, the Council of Mortgage Lenders (CML) has said.

The council has predicted that there will be around 860,000 mortgage approvals in the coming 12 months, which would be the fourth year in succession that the number has hovered around the 900,000 mark.

In monetary value, the body has said that it expects home loans to the value of £135 billion to be taken out in 2011.

Such activity would mean the mortgage market will continue to function at about two thirds of what is considered to be a normal level.

The mortgage market has struggled since the economic crisis began in 2007, as lenders have adopted a 'safety first' attitude to mortgages.

However, in recent months, Moneyfacts research has found that the number of mortgage deals at higher loan-to-values has increased, meaning more home loans are available to those with smaller deposits, albeit at higher rates.

Given the increasing likelihood of a rise in the base rate, the CML has added its voice to the growing list of commentators that expect to see a robust year for remortgaging activity.

Most homeowners have chosen to stay on their lender's standard variable rate as the low base rate of interest made it preferable to taking out a new deal.

As the possibility of a Bank of England decision to nudge the measure up increases – many are calling for it to combat sky-high inflation – homeowners are likely to become increasing tempted to lock in to a competitive fixed rate mortgage.

Addressing the challenges for 2011, the CML cited the mortgage market review.

The organisation bitterly opposed the plans when they were announced last year, releasing figures that showed lending would be significantly reduced, although its views appear to have calmed.

"There are some signs that the Financial Services Authority may be re-assessing its approach in the light of compelling new evidence we presented as part of out comprehensive submission to the regulator in November last year," it said.

On mortgage arrears and possessions, the CML commented: "Our prediction that mortgage arrears and possessions will tick up again in 2011 will ensure that there is ongoing scrutiny of market behaviour.

"In our view, payment problems will be driven by a combination of job losses, reduced government support for borrowers in difficulty and an end to the mortgage rescue options for some households with worsening mortgage arrears."

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