Northern Rock predicts that gross mortgage lending will hit £360bn this year despite fears from some commentators that the sector could contract.
The UK’s fourth-biggest lender, which last week revealed profits of £627m and record gross lending of £33bn for 2006, giving it an 8.3 per cent market share, has made the bold prediction against the tide of market opinion. Last year’s total stood at £346bn.
The Council of Mortgage Lenders had predicted a £360bn market in 2007 before swap rates rose sharply over Christmas and New Year and the base rate increased to 5.25 per cent in January.
The CML has since said it might have to review its forecast, amid suggestions from many commentators that potential borrowers will be put off by higher mortgage rates.
HBOS believes that gross lending will be around £330bn this year but Hamptons International Mortgages puts the figure as low as £300bn, citing the increased use of retention strategies by lenders.
Northern Rock has pledged to expand intermediary distribution with a move into sub-prime via a partnership with Lehman Brothers.
A Northern Rock spokesman says: “We expect UK gross residential lending in 2007 to be a little higher than 2006 at around £360bn, underpinned by a stable housing market and sustained remortgage activity.”
Chief executive Adam Applegarth says: “We have low levels of arrears, strong credit risk management and a low-risk balance sheet.”