4% rise in house prices in 2005, CML predicts

The CML believes that housing market analysts who are predicting a crash are mistaken.

In its new forecasts for 2005-2007, published yesterday, the CML expects the recent slowdown to continue, but believes this will be felt mostly through lower numbers of transactions rather than in any widespread price reductions.

However, these predictions stand at odds with recent estimates from two of the largest mortgage lenders in the country.

Halifax recently predicted that house prices would fall two per cent next year, while Nationwide forecast a two per cent rise in prices.

But despite the differences between figures, all these predictions point to modest changes far removed from the 15 per cent house price inflation of 2003.

Looking ahead the CML predicts that the slowdown will carry on into 2006 and 2007 with house price rises of just two per cent in both years.

CML's senior economist, Jennet Vass says: "Although our forecasts herald a slower market, there is good news here for first-time buyers over the longer term."

She adds: "Essentially, as earnings grow, houses are likely to become gradually more affordable again."

The CML expects to see subdued house price growth over the next three years and does not envisage "any dramatic market adjustment".

It also calculates that gross lending will fall £22 billion to £271 billion next year.