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UK will avoid a full-scale recession, say lenders

The Intermediary Mortgage Lenders’ Association’s latest member survey reveals that lenders believe the UK will avoid a full-scale recession.

The majority of lenders say the economy will either continue to achieve positive growth every quarter or there will be a maximum of one quarter of falling GDP.

44 per cent of respondents think the UK may see two quarters of negative growth, but none of them expects a full-blown recession over a sustained period of time.

Intermediaries agree that the mortgage market is becoming less positive, with almost eight in ten saying conditions are getting worse, although two in ten say they are unchanged.

The South East’s brokers were markedly more positive about the outlook than those in other parts of the country. Around 22 per cent said conditions remain unchanged, compared with only 16 per cent in other regions.

IMLA executive director Peter Williams says: “Times are tough in the mortgage market, but key participants in industry remain confident that we can steer clear of an all-out recession. There are also pockets of greater optimism – surprisingly enough, in the South East, for example.”

IMLA says its members believe house prices will fall by an average of 2.8 per cent over the coming year, and as house prices fall and consumers’ finances come under greater pressure, the majority of lenders anticipate that arrears and possessions will rise slightly.

Among intermediaries, 47 per cent expect house prices to decline, but a surprisingly large proportion – 43 per cent – anticipate stable prices while just over 3 per cent think prices will rise

The majority of respondents expect Bank of England Base Rate to be 4.75 per cent by year end, although one thought it would be as low as 4.25 per cent. They also expect the spread between Base and Libor to contract to around 30 bp by end 2008 – the lowest it has been for some months.

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