IMLA Calls for Regulatory Review to Aid FirstTime Buyers and Boost New Builds

The Intermediary Mortgage Lenders Association (IMLA) has called upon the government to review regulatory barriers that hinder first-time homeownership and the new build market.

According to IMLA, such a review could significantly boost lending to first-time buyers and stimulate the construction of new homes, addressing the long-standing issue of housing affordability and accessibility.

IMLA’s latest research on mortgage affordability reveals a staggering shortfall of 3.1 million first-time buyers since the financial crisis, as of the end of 2023. This finding is particularly striking given the period of lowinterest rates from 2013 to 2022, which provided a favourable environment for homebuying. Despite this, the number of firsttime buyers did not reach anticipated levels, with implications for the new build market.

The IMLA report, titled The Mortgage Affordability Paradox, underscores two periods over the past four decades characterised by notable mortgage affordability. During these periods, mortgage repayments constituted less than 30% of a first-time buyer’s income: from 1993 to 2003 and from 2013 to 2022.

However, a stark contrast is evident in the data. In the first period, the number of first-time buyers averaged 500,000 annually, compared to just 330,000 in the second period. This decline has had a direct impact on the demand for new build homes, which are often targeted at first-time buyers.

Since interest rates began rising, the number of first-time buyers has plummeted from 405,000 in 2021 to just 257,000 last year. This has further exacerbated the challenges facing the new build market, where developers rely on a steady influx of first-time buyers to drive demand and justify new construction projects. Additionally, the IMLA report indicates that buying a home is now more expensive than renting in all UK regions except the North West, Scotland, and Northern Ireland. This marks a significant shift from IMLA’s previous analysis in September 2021, which found it was cheaper to buy than rent in all regions. Despite significant rent increases of 22% nationally and 24% in London between September 2021 and April 2024, the cost of buying has risen even more sharply.

An earlier IMLA report on the intergenerational divide in housing suggested that even without house price growth over the next 30 years, a buyer with a 25-year 95% LTV mortgage could be £352,000 better off than a renter.

Mortgage rates would need to exceed 11.5% for renting to become financially advantageous compared to buying. This potential long-term financial benefit underscores the importance of facilitating homeownership, particularly for new builds that can meet modern efficiency standards and contribute to overall housing supply.

“Homeownership brings a range of invaluable benefits to individuals and their families, not just in terms of the accumulated wealth it confers but the peace of mind afforded by security of tenure,” said Kate Davies, executive director of IMLA. “It can also benefit wider society, helping to build settled communities and drive demand for new build developments.”

In conclusion, IMLA’s call for a regulatory review underscores the critical need to address the barriers that prevent potential first-time buyers from entering the housing market. By doing so, the government could facilitate a more inclusive and accessible path to homeownership, benefiting individuals and society at large while also stimulating the new build sector.