First time home buyers in the UK may struggle to find affordable homes over the coming months as house prices are set to increase by seven per cent, predictions indicate.
The forecast from the Council of Mortgage lenders (CML) is more than triple the two per cent inflation expected at the start of the year.Lending is also likely to be more buoyant for those looking for a mortgage, reaching £310 billion rather than the £285 billion previously forecast.
Jim Cunningham, CML senior economist, said: "The immediate signs are that demand will remain robust over the next few months."
However, the CML expects that the strength of the housing market will cause interest rate rises, with interest forecast at 4.75 per cent at the end of the year.
The increases would be "likely to result in a modest fall in the level of transactions in the second half of this year", Mr Cunningham continued.
First time buyers should remain aware that higher interest rates may cause more people to fall behind with mortgage repayments, leading to more repossessions, according to CML predictions.
The trend of decreasing transactions predicted for the second half of the year was expected to continue into 2007.
For first time buyers, prospects look bright in 2008 when lower inflation may see interest rates reduce.
