The cumulative shortfall in the number of new buyers since the financial crisis stood at 3.1 million at the end of 2023, Imla’s latest research shows.
Despite strong affordability during the ultra-low interest rate years from 2013 to 2022, FTB figures failed to reach the levels that previous trends had suggested.
Imla’s report, The mortgage affordability paradox, shows that over the past forty years, two periods have provided excellent affordability, with mortgage repayments accounting for less than 30% of an FTB’s income: 1993 to 2003 and 2013 to 2022 .
During those periods, FTB numbers averaged 500,000 and 330,000 per year, respectively.
Imla says the extensive regulations introduced in response to the financial crisis could have had an impact on FTB numbers.
These regulations include higher capital requirements for high LTV loans and the Financial Policy Committee (FPC) rule limiting loans of 4.5x income or more to no more than 15% of lenders’ advances.
The impact of stricter regulation has become even greater since interest rates began to rise, with the number of FTBs falling sharply from 405,000 in 2021 to 257,000 last year.
The report also shows that it is now more expensive to buy than to rent in every region of Britain except the North West, Scotland and Northern Ireland.
Imla says this is a “dramatic turnaround” from its last affordability analysis, published in September 2021, when it was cheaper to buy than to rent in all regions.
The change has taken place despite a significant increase in rental prices. Between September 2021 and April 2024, rents rose by 22% nationally and by 24% in London.
IMLA director Kate Davies suggests the government can help future FTB by examining the legal barriers to ownership.
Davies notes: “We believe it would be beneficial to consumers if the government established a regulatory framework that explicitly recognized the interests of future first-time buyers, with affordability rules reassessed accordingly.”
“Particular attention should be paid to the FPC’s LTI flow limit, under which lenders are limited to offering no more than 15% of their mortgages at or above 4.5 times income, as this appears at odds with the rest of the affordability regime.