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Mortgage lending to fall, says CML

Mortgage lending is set to fall, although house price inflation is likely to remain positive, according to the 2008 housing market forecasts from the Council of Mortgage Lenders (CML).According to the CML, in the current economic climate, publishing a housing forecast is tougher and more uncertain than usual, particularly because of the ongoing effects of the credit crunch.However, the organisation predicts that house prices will rise by seven per cent in 2007 as a whole and by one per cent in 2008, while it expects gross lending to reach £360 billion in 2007, but only £340 billion in 2008. The CML has stuck to its guns regarding its earlier prediction that that number of households going into arrears or suffering repossession would go up, as an estimated 1.4 million households come off short-term fixed rate deals, but now predicts that this trend will actually be more severe, as lenders tighten their belts.CML director general Michael Coogan commented: "The housing and mortgage markets are facing their most challenging period since Labour came to power a decade ago. "Luckily, the credit crunch occurred at a time when the UK economy was robust, but even so the effects on the financial sector are significant, and the mortgage market is not immune from them."We now expect a slower mortgage market next year, although by no means a stagnant one. Most borrowers will cope, but not everyone will escape unharmed from the effects of a slower market, so the government should make it a policy priority to overhaul the system of state support for home-owners, which has lagged pitifully behind the times."

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