The cumulative shortfall in first-time buyer (FTB) numbers since the financial crisis reached 3.1m by the end of 2023, Imla’s latest research reveals.

Despite strong affordability during the ultra-low interest rate years from 2013 to 2022, FTB numbers failed to pick up to the level previous trends would have suggested.

Imla’s report, The mortgage affordability paradox, reveals that over the last 40 years, two periods have provided excellent affordability, with mortgage repayments taking up less than 30% of a FTB’s income: 1993 to 2003 and 2013 to 2022.

During those periods, FTB numbers averaged 500,000 a year and 330,000 a year, respectively.

Imla says wide-ranging regulation that was put in place in response to the financial crisis could have had an impact on FTB numbers.

These regulations include higher capital requirements on high LTV lending and the Financial Policy Committee (FPC) rule restricting lending at or above 4.5x income to no more than 15% of lenders’ advances.

The impact of tougher regulation has been compounded since interest rates started rising, with FTB numbers dropping sharply from 405,000 in 2021 to 257,000 last year.

The report also reveals that it is now more expensive to buy than to rent in every region of the UK except the North West, Scotland and Northern Ireland.

Imla says this is a “dramatic turnaround” from its last analysis of affordability, which was published in September 2021, when it was cheaper to buy than to rent in all regions.

The change has occurred despite a sizable rise in rents. Between September 2021 and April 2024, rents rose by 22% nationally and 24% in London.

Imla executive director Kate Davies suggests that the government can help future FTB by examining the regulatory barriers to ownership.

Davies comments: “We believe that it would be beneficial for consumers if the government were to establish a framework for regulators where the interests of future first-time buyers are explicitly recognised, with affordability regulations reassessed accordingly.”

“Particular attention should be paid to the FPC’s LTI flow limit, under which lenders are restricted to offering no more than 15% of their mortgages at or above 4.5 times income, as this seems at odds with the rest of the affordability regime.”