New research has revealed that around 3.5 million households who might have expected to buy their first home since the financial crisis are still waiting on the sidelines – not because they can’t afford the monthly payments, but because of regulatory barriers that block access to borrowing.
The findings, published by the Intermediary Mortgage Lenders Association (IMLA), form part of an updated report entitled The Mortgage Affordability Paradox: The Picture in 2025.
The paper is a follow-up to IMLA’s 2021 report, which estimated that 2.7 million potential buyers had been prevented from entering the market since 2008. That number has now climbed by a further 800,000.
Despite sharp rises in interest rates following the 2022 mini-budget crisis, last year saw 330,000 first-time buyers step onto the ladder – some 15% above the long-term average for the past 17 years.
SURPRESSED DEMAND
IMLA says this highlights a significant level of suppressed demand and suggests many more would buy if they were permitted to borrow.
The organisation points to the Financial Policy Committee’s Loan-to-Income (LTI) flow limit as a key obstacle, calling it outdated in a world where affordability should be assessed more holistically.
Kate Davies, executive director of IMLA, says: “Our research backs up several previous studies which conclude that far more people could reasonably afford to buy homes and comfortably service a mortgage than current regulations and attitude to risk allow.”
MORE ACTION NEEDED
She adds: “Clearly, more action is needed to help first-time buyers. In particular, the LTI flow limit restricting how many mortgages lenders can offer at higher loan-to-income levels is blocking many sensible borrowers from buying their first home.
“The government’s promise to reduce financial services red tape is welcome, and we await the outcome of the FCA’s Mortgage Rule Review with interest.
“But we also need to change the narrative which tells aspiring first-time buyers that homes are unaffordable.”
Davies ads that while many lenders are innovating with longer mortgage terms, extended income multiples and higher loan-to-value products, both government and regulators need to follow through on ‘the necessary rule changes to really move the dial’.
MARKET LIFEBLOOD
She says: “First-time buyers are the lifeblood of a healthy housing market, and homeownership confers a range of benefits on the population, from security to improved mental and physical wellbeing, not to mention enormous long term financial benefits.
“An earlier IMLA study found that someone buying a home, initially with a 95% LTV mortgage could be £352,000 better off over 30 years than someone who continues to rent privately.
“We need to focus on unlocking the huge pent-up demand illustrated by this report by making it easier for people to take that first step onto the property ladder, and broadcasting the message that, contrary to common perception, millions more can afford to buy their own home.”
