UK mortgage lending association abandons short term property price forecasts

Trying to predict property prices in the UK in the short term is futile in the current economic turmoil, according to the country's trade association for mortgage lending industry.

The Council of Mortgage Lenders has admitted that its May forecast of a 7% fall this year is wide of the mark and says it does not expect the market to recover from its current slump before 2010.

It is now abandoning attempts to predict house price movements because of the uncertainties that surround the market. Its members account for 98% of residential mortgages in the UK

'Market forecasting is problematic at the best of times but, in the aftermath of all the recent uncertainty, trying to predict accurately how the housing market will perform in the coming months is even more difficult than usual,' a spokesman said.

It based its last forecast in May on an assumption that the Bank of England's special liquidity scheme would begin to have some modest beneficial effects on the availability of mortgage credit in the second half of this year. And in the late summer, there were tentative signs of an improvement in conditions, with a fall in mortgage rates for mainstream, lower risk customers.

But the current financial market turmoil has sparked another surge in inter-bank lending rates and three month rates, to which some tracker mortgages are linked, have risen.

'Looking ahead, mortgage approvals data remains weak, and the number of future house purchases will be affected by consumer sentiment and the outlook for property prices,' the spokesman added.

'Our current market predictions have understated the extent of the house price correction and we think it is futile to update them at this stage of the year.'

There is now broad consensus throughout the industry that property prices in the UK are likely to fall by 20% during 2008 and 2009 with prominent commentators like Graham Beale, chief economist with the Nationwide predicting they could be as high as 25%.