UK house prices are expected to fall around 7% this year and property transactions in England and Wales by some 35%, according to the Council of Mortgage Lenders (CML).

It reckons just 770,000 property deals will go through in 2008, having predicted a 14% drop from 1.18m to 1.01m last October alongside a 1% increase in house prices. Gross mortgage lending is seen falling by a fifth on the year before to £285bn after lending rose an estimated £25.3bn in April, 5% up on the previous month, but down 8% from April 2007.

The CML only expects one more interest rate cut this year, with borrowing costs ending 2008 at 4.75%.

"Our forecasts assume some indirect benefits from the Bank of England special liquidity scheme beginning to have an effect in the mortgage market in the later part of the year," said CML director general Michael Coogan.

"Over the next few months, lending volumes will get worse before they get better."

Source: City AM