The CML believes that house prices will finish seven per cent higher at the end of 2006 than at the start, a significant increase from the two per cent it forecast in February.
As a result, gross lending is expected to increase from the initial estimate of £285 billion to £310 billion with the CML saying interest rates are likely to rise to 4.75 per cent by the end of the year.
This will lead to 15,000 repossessions in 2006 and again in 2007, rather than the 12,000 previously predicted, with 130,000 mortgages more than three months in arrears by the end of 2007, rather than 120,000.
“The immediate signs are that demand will remain robust over the next few months,” commented the author of the forecasts and CML senior economist, Jim Cunningham.
“But we take the view that confidence and activity are closely associated with interest rate movements and expectations.”