The Council of Mortgage Lenders has announced a prediction of 4% growth in house prices in 2005.

The CML expects gross lending to total £271 billion in 2005, down from £293 billion this year.

Net lending is expected to be at £94 billion, down from £103 billion during 2004.

However, the CML expects a slowdown to continue in 2005, but believes this will be felt mostly through lower numbers of mortgage lendings rather than in any widespread price reductions. Transactions are likely to total around 1.23 million next year, compared with an estimated 1.64 million this year.

Looking beyond next year, the CML expects a continued slower market in 2006 and 2007. The likelihood is that the housing market is set for stable but slower levels of activity for some time, as the market adjusts from its recent exuberance.

CML Senior Economist Jennet Siebrits said:

“Although our forecasts herald a slower market, there is good news here for first-time buyers over the longer term. Essentially, as earnings grow, houses are likely to become gradually more affordable again.

“Our house price forecasts expect continued subdued growth in prices over the next three years. Although there may be some modest price falls in some areas, we expect national average price growth to remain positive and we do not envisage any dramatic market adjustment. Although our price forecasts are at the high end of the spectrum of those that have so far been published, we see modest price growth as consistent with the positive outlook for the wider economy and with the ongoing mismatch between housing demand and supply.”