Restrictions introduced a decade ago after the financial crisis are holding back many first time buyers from purchasing a home.
That’s the claim from the Intermediary Mortgage Lenders Association, which is calling on the the government to consider easing these restrictions in the wake of the Coronavirus crisis.
IMLA believes that a large fall in the number of first-time buyers after the financial crisis in 2008 has created a cumulative shortfall of 2.7m young households which could be now have been expected to have purchased homes.
The association insists there should be 500,000 first time buyers a year in the UK where in 2019 there were only 352,000.
If the restrictions did not exist, or were at least eased, the housing market and first time buyers’ fortunes would be improved, IMLA says, given that otherwise there are low interest rates and more affordable mortgages than in the past.
“The figures speak for themselves” insists Kate Davies, executive director of IMLA.
“Pre-crisis, the first time buyer market was showing great signs of recovery since the financial crash in 2008, with a record high of £60 billion lent to new homebuyers in 2019. And before the recent pandemic, this rise in new homeownership looked set to continue” she says.
“There is clearly demand out there – and as life begins to return to some form of normal after COVID-19, we believe there is scope for new homebuyers to help lead economic recovery in the UK. It also seems likely that interest rates will continue to remain at a very low rate for some time” Davies continues.
“We would encourage the government to review whether the existing regulatory restrictions remain fit for purpose in that environment. For example, the three per cent stressed rate that lenders must apply in the affordability calculation looks even more out of line with economic reality now that long term government bond yields are well below one per cent, suggesting that interest rates will remain extremely low for decades to come.”