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House prices set to fall this year , says CML

The Council of Mortgage Lenders is predicting modest falls in house prices by the end of this year with a flat 2006 and an average rise of just 2 per cent in 2007.

The CML forecast says arrears are on the rise with an increase in borrowers with over three months’ mortgage arrears from 92,000 in 2004 up to 115,000 in 2005 and rising to 130,000 in 2007.

It predicts that first-time buyers as a percentage of loans will rise from 31 to 36 per cent by 2007. The number of transactions is expected to fall from 1.79 million in 2004 to 1.35 million in 2005, levelling off at 1.3 million for 2006 and 2007.

Remortgages as a percentage of gross advances will show a slight fall, the report predicts, while in 2005 and 2006 remortgages will constitute 45 per cent of gross advances, falling 1 per cent to 44 per cent in 2007.

CML head of research Bob Pannell says: “The CML expects the next few years to be more challenging for policymakers, lenders and households. Over the next couple of years, house price growth is likely to be negligible but we are not expecting to see widespread or significant falls at national level.”

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