A downgraded repossession forecast by the Council of Mortgage Lenders (CML) is widely being reported as more good news on the housing market. It is anything but.
The CML now says 65,000 families will lose their homes this year, compared to the 75,000 it forecast six months ago, as a result of lower interest rates, increased forebearance by lenders and government intervention. That means the total should peak well short of the 75,500 seen in the last crash in 1991.
But before anyone gets too carried away with that, it is also warning that ‘the improvement is likely to be slow and drawn out, especially as the extensive fiscal, monetary and credit support measures are gradually unwound’.
It’s been clear that the 75,000 figure was an overestimate since the CML published figures showing 12,800 repossessions in the first quarter of the year. That was a 50% rise on the first quarter of 2008 but much better than it had expected.
However, the latest estimate suggests that the rest of the year will see another 52,000 families lose their homes - a rise of 66% on the last three quarters of 2008. That hardly sounds like a recovery - the repossession rate will actually accelerate from now.
It’s the same story with the rest of the CML predictions, despite a reduced forecast for the number of people in mortgage arrears. It says the number of transactions will fall to just 700,000 this year (the same as it forecast six months ago), less than half of the level seen in 2006 and 2007 and 23% down on an already appalling 2008.
The CML also says the lending famine will continue. Gross advances will still fall to £145 bn, down 44% on 2008 and 60% on 2007. And although net lending will not be quite as disastrous as it said six months ago, it will still be in unprecedented negative territory, with banks lending £5 bn less in new mortgages than they are repaid on old ones.
It’s perfectly possible that these forecasts too will turn out to be too gloomy, leading to more ‘good news’ reports at the end of the year. However, the CML rightly raises the question of what happens when all the emergency intervention comes to an end. When you bear in mind that the recovery so far is based on interest rates that cannot stay this low for ever, on time-limited government support schemes and on multi-billion schemes to boost lending, it’s clear that there is still plenty of pain to come.
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