Nearly 3m would-be first-time buyers have been locked out of the market since the last financial crisis as a result of regulatory hurdles, research by the Intermediary Mortgage Lenders Association suggests.

The trade body calculates that there is a shortfall of 2.7m households that would have been expected to buy a home since the last crisis on the basis of previous demographic trends.

It says that there should be 500,000 first-time buyers a year, which is 150,000 more than the annual figure for 2019.

Imla argues that the 3 per cent stress test rate lenders must use in affordability calculations “looks even more out of line with economic reality now that long term government bond yields are well below 1 per cent, suggesting that interest rates will remain extremely low for decades to come”.

It warns that this rate, and the limits imposed by regulators on high loan-to-income lending, are “preventing a large pool of potential buyers from entering owner-occupation, despite them being otherwise able to meet the average repayment costs of a mortgage”.

But Imla says that demand from lenders to support this group combined with affordable interest rates mean the long-term outlook for the market is positive, but the government should examine the regulatory barriers holding back aspiring buyers.

Imla executive director Kate Davies says: “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.

“The figures speak for themselves. Pre-crisis, the first time buyer market was showing great signs of recovery since the financial crash in 2008, with a record high of £60bn lent to new homebuyers in 2019. 

“And before the recent pandemic, this rise in new homeownership looked set to continue.

“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.” 

Imla is also urging the government to extend the current phase of the Help to Buy scheme following the disruption to the market this year.