Property prices will continue to rise over coming year - but only by a tiny margin, the Council of Mortgage Lenders predicted today.
Property prices will continue to rise over coming year - but only by a tiny margin, the Council of Mortgage Lenders (CML) predicted today.
While the association ruled out a house price crash over the next 12 months, it argued prices will increase by just 7% overall this year, and 1% next year.
If the CML is right, it means that house price growth is slowing as most indices have shown around a 10% rise over the last 12 months.
The CML also predicted that the Bank of England Base Rate, which currently stands at 5.75%, will drop by 0.25% this year and fall significantly to 5% by December 2008.
CML director general Michael Coogan explained that while he expects a slower mortgage market next year and a decline in gross mortgage lending, he believes the UK economy is robust and most borrowers will cope and escape unharmed.
However, he expressed concern for sub-prime borrowers, admitting that sub-prime remortgaging opportunities have been reduced as a result of funding constraints and tighter lending criteria, and calling on the Government to "make it a policy priority to overhaul the system of state support for homeowners, which has lagged pitifully behind the times".
The CML's prediction follows hot on the heels of claims by Hometrack, a property valuation website, that UK house prices fell in October for the first time in two years.
The website revealed in its monthly house price index that prices dropped by 0.1% in on average and predicted further "small price falls" in the next few months.
Despite this, some companies remain bullish about the outlook for UK house prices. Property investment firm Assetz, for example, dismissed the CML's prediction that prices will rise just 1% next year as "overly cautious".
Assetz chief executive Stuart Law said that, given the continuing supply/demand imbalance of property in the UK, and with an anticipated period of lower interest rates on the horizon, he would predict a "more realistic" house price increase of 5% in 2008.
Homeowners everywhere have no doubt got their fingers crossed he's right, as first-time buyers jump up and down with excitement at the thought he might be wrong.
Only time will tell...
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