The CML says house prices will rise 3% next year
The prediction came as the CML announced that mortgage lending rose to a record £15.5bn during July.
The group forecast house prices would show a rise of 11% by the end of 2001, a big increase on its previous estimate of 5%.
But the rate of growth is predicted to slow next year, with the CML forecasting price rises of only 3% in 2002 and 2003.
Price rises 'sluggish'
"Levels of mortgage lending in July continued to beat their previous records. But lending is likely to slow down as we move into next year," said CML director general Michael Coogan.
"We expect house price to continue rising, but anticipate that the rise will become more sluggish following this year's unexpectedly strong growth," he added.
The group also warned that their forecast could be over-optimistic if the global economic slowdown proved sharper than expected.
Other threats identified include a fall in consumer confidence, and a fall in the value of sterling leading to inflationary pressures and a rise in interest rates.
Households in 'strong position'
The surprise cut in the base lending rate by the Bank of England earlier this month led some commentators to worry the recent surge in house prices could be fuelled even more.
The concern is there could be repeat of the situation in the early 1990s when a house price boom ended in financial hardship for thousands of people when interest rates rose.
But the CML doesn't think there will be a repeat of this scenario.
"The good news is that households are in a strong position to cope with any deterioration in the UK economy.
"Mortgages are affordable, and set to remain so, given that interest rates are expected to remain low," said Mr Coogan.
The CML says the number of property transactions are expected to fall back to 1.38 million next year from 1.41 million in 2001.
As a result the level of new mortgage lending is also forecast to fall from £139bn in 2001 to £135bn next year.