"The credit crunch has resulted in a gap in the availability of mortgage credit relative to demand. Lenders have changed their product ranges, tightened lending criteria and reviewed their pricing in order to maintain their individual ability to manage demand," Jim Cunningham, senior economist at the CML, said in the forecast.
Gross mortgage lending will total around 285 billion pounds this year, down 21 percent on 2007 and well below the previous forecast of 340 billion.
Net lending will be half last year’s level at 55 billion billion pounds, and down from the October forecast of 90 billion, it said.
The CML’s members include banks, building societies and other lenders and provide 98 percent of UK home loans.
Gross mortgage lending was 25.3 billion pounds in April, up 5 percent from March but down 8 percent from April 2007, the CML’s regular lending data showed.
Conditions in the UK housing market will "get worse before they get better", with mortgage lending expected to fall by 21 per cent this year while house prices will decline by 7 per cent.
According to revised figures released by the Council of Mortgage Lenders (CML) house prices will fall by 7 per cent in 2008, in contrast to its previous expectations of a 1 per cent rise.
Today’s figures also reveal gross mortgage lending had been expected to total £340 billion this year but is now forecast to reach £285 billion in 2008. Over the same period, the number of house sales are predicted to fall from one million to 770,000.
Michael Coogan, director general at the CML, said: "Over the next few months, lending volumes will get worse before they get better.
Howard Archer, chief UK and European economist at Global Insight, is also forecasting that house prices will decline by 7 per cent this year and by 9 per cent in 2009.
Though he admitted: "…it is looking ever more possible that house prices will suffer double-digit falls both this year and in 2009, given serious buyer affordability constraints, limited and often more expensive mortgages available due to ongoing very tight lending conditions, a deteriorating economic outlook and reduced prospects for further interest rate cuts in the near term at least.
Gross mortgage lending in April showed an improvement on the previous month, rising 5 per cent to an estimated £25.3 billion compared to March. However, compared to April last year, gross lending fell by 8 per cent.
May 21 (Bloomberg) — U.K. mortgage lending fell 8 percent in April from a year earlier, the Council of Mortgage Lenders said.
Gross lending against property declined to 25.3 billion pounds ($50 billion) from 27.4 billion pounds a year earlier, the London-based group, which represents U.K. home-loan providers, said in a statement today. Lending rose 5 percent from March. CML also said it expects house prices to drop 7 percent this year.
In a separate report, the Bank of England said U.K. annual money supply slowed in April. M4, the broadest gauge of money supply, measuring currency in circulation and deposits at banks, rose 11.2 percent from a year earlier, compared with 11.9 percent in March, the central bank said in a statement posted on its Web site. On the month, it rose 0.7 percent.