AMI has warned gross mortgage lending for 2010 may fall short of its previous £150bn estimation.
In its Quarterly Economic Bulletin examining the economy, housing and mortgage markets, AMI says the withdrawal of the Government's Special Liquidity Scheme in April 2011 will have a serious effect on lending.
It said the end of the Government's support will leave the banking sector with short-term liquidity problems and needing to find £800bn for refinancing in the next 18 months.
Of this, £200bn is owed to the Bank of England via the Special Liquidity Scheme, in which the Bank swapped prime banking assets for Treasury bills.
The Government's measures to reduce the country's deficit will also drag on the economy, with the proposed public sector redundancies likely to exacerbate the already pronounced divide between the housing markets in the South East and North.
Robert Sinclair, director of AMI, says: "All the main banks face challenges to their ability to fund mortgage lending as the Special Liquidity Scheme reaches its repayment phase early next year. A practical solution is required that allows a sustainable mortgage market, so that consumers can look for a property safe in the knowledge that funds might be available."
He adds the Emergency Budget has increased certainty over interest rates, taxation plans and levels of unemployment, with AMI forecasting house prices will remain largely unchanged by the end of the year, while a large degree of regional variation remains.
Sinclair continues: "Brokers continue to exert significant influence over the market as customers continue to use them to look across the market. This ensures they have the best chance of getting a mortgage that will allow them to complete on the property they want."
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