The Council of Mortgage Lenders (CML) has published its mortgage market forecast for 2009, admitting net lending is likely to fall into the negative - as consumers repay existing mortgage debt to a greater extent than they borrow on new mortgages - to as low as minus £25bn.

The trade body suggested activity within the housing market will remain extremely subdued, with around 700,000 housing transactions in 2009, down from around 900,000 this year and 1.6 million in 2007. It predicted gross mortgage lending of around £145bn next year, down from around £258bn this year, and £363bn in 2007.
The situation with arrears is also expected to get worse. The CML forecasted that by the end of 2008, 210,000 households will be more than three months in arrears, and this number is expected to increase to 500,000 by the end of 2009. Repossessions may rise to 75,000, though the CML emphasised a significant number of these would be cases where the property is abandoned or where property fraud has been perpetrated, and a sizeable share are expected to be buy-to-let mortgages.

The CML was at pains to point out that these forecasts should be seen as indicative, rather than a precise assessment.

Michael Coogan, director general of the CML, said: “In looking ahead to the coming year, the housing market will remain extremely subdued and net mortgage lending is likely to turn negative. Repayment problems will worsen against the backdrop of rising unemployment but lenders and Government are working to try to reduce the negative impact on borrowers.

“Recent glimmers of light in terms of Government intervention to improve conditions to support new lending are helpful, but more will be needed. 2009 will be a challenging year, but borrowers who remain in employment will see some benefits in the form of lower mortgage rates.”

The report follows confirmation from the CML that gross mortgage lending totalled an estimated £14.6bn in November, a 22% fall from October and a 51% fall from November last year.

The CML noted there is typically a decline from October to November, but observed this was considerably larger than usual and suggested this was a reflection of the market disruption and continued deterioration of confidence in the economy.

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