According to the Council of Mortgage Lenders, house prices will jump 7% in 2006.

House prices are forecasted to increase at more than three times the rate previously predicted this year.The Council of Mortgage Lenders anticipated the value of the average UK property to rise by 7% during 2006, well up on the 2% it forecast in February.

However, a warning was made that the more buoyant property market was also likely to contribute to interest rates being increased, which would lead to more people falling behind with mortgage payments and having their homes repossessed.

The group now expected about 1.2m properties to change hands this year, up from the 970,000 it had previously predicted. Mortgage lending was also expected to be more buoyant than it had forecast, with lenders advancing £310bn during 2006, 9% more than expected. Net lending, which stripped out redemptions and repayments, was predicted to be 25% higher at £100bn.

The group still expected the property market to be weaker in 2007 than it is this year, but has nevertheless revised its forecast for house price inflation for the year to 3% from 2%. It predicted that net mortgage lending would be £85bn, up from the £75bn previously expected. However, the group was also revising its interest rate forecasts and now expected the cost of borrowing to be 4.75% rather than 4.5% at the end of both 2006 and 2007.

By M. Sese
http://realestatepress.org