Financial outlook not as bleak as predicted

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Financial outlook not as bleak as predicted

Tue 19th Feb 2008

The Council of Mortgage Lenders (CML) released its latest News and Views statement today, which offered some positive news on the future of the UK economy.

Previously the Financial Services Authority (FSA) warned that homeowners could be hit hard by the impact of payment shock on their mortgages, but the CML predicts that the effect will be more "muted" than expected and will "reduce markedly" as the year progresses.

The CML had forecast that there would be 30,000 repossessions last year, but the actual figure was ten per cent lower, although that is still up from a low of 10,000 in 2003 and 2004.

Interest rates are unlikely to be cut aggressively due to conflicting pressures from rising inflation and slowing growth, according to the organisation.

This will put pressure on consumers, but the CML predicts that "belt-tightening rather than default" will be the common response.

It also believes the outlook for mortgage affordability is improving.

There have been mixed views from analysts recently on the future of the UK economy, reflecting the prevailing uncertainty over the global credit crunch.

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