The Intermediary Mortgage Lenders Association (IMLA) has urged the Government to consider easing restrictions to help first-time homebuyers lead an economic recovery during the COVID-19 pandemic.

The trade body has suggested current stress testing measures and controls on the proportion of higher loan-to-income lending are preventing a large pool of potential buyers from entering owner-occupation, despite being able to meet the average repayment costs of a mortgage.

IMLA estimated that a sharp fall in the number of first-time buyers after the 2008 financial crisis created a shortfall of 2.7 million young households, which based on demographic trends, could have otherwise been expected to buy a home.

According to a new report published by the trade body, there should be 500,000 first-time buyers a year in the UK – despite there being just 352,000 at the end of 2019.

IMLA stated that the large group of aspiring first-time buyers suggests the long-term outlook for the market is positive, but that the Government will need to examine the regulatory barriers restricting potential first-time buyers planning to step onto the housing ladder.

IMLA executive director, Kate Davies, commented: “The coronavirus crisis has created great uncertainty for lenders, intermediaries and aspiring homeowners. However, early signs suggest there may be room for optimism about the market’s long-term future, with first-time buyers leading the charge on the road to recovery.

“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.

“We would therefore encourage the Government to review whether the existing regulatory restrictions remain fit for purpose in that environment. For example, the 3% 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 1%, suggesting that interest rates will remain extremely low for decades to come.”

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