House prices to fall 7% this year

House prices will fall 7% this year, according to revised forecasts from the Council of Mortgage Lenders, out today.

The CML said it had revised its previous forecast for the 2008, made last October, down from 1% price growth to the sharp fall now predicted.

The body, which represents banks that lend the money for mortgages to homeowners, has revised its forecasts of all major indices down sharply, with the amount of money lent now expect to fall to just £55bn, only just over half the £108bn lent in 2007. In October it had predicted a figure of £90bn.

The number of property sales will fall to 770,000, from 1.2 million last year, and compared to a previous prediction of 1.1 million. The number of transactions has not fallen below one million for any of the last four years.

In commentary the CML says that the credit crunch in the financial markets may now be over its worst period, but that availability of mortgage credit will take a long while to improve. “We expect only a modest improvement, at best, in the availability of mortgage credit before the end of this year,” the forecast says.

Michael Coogan, CML director general, said: “Over the next few months, lending volumes will get worse before they get better. But our forecasts assume some indirect benefits from the Bank of England special liquidity scheme beginning to have an effect in the mortgage market in the later part of the year.”