The number of would-be homeowners in the UK still waiting to enter the property market has risen to 3.5 million, according to new research from the Intermediary Mortgage Lenders Association (IMLA).

The updated findings, published in a new edition of the report The Mortgage Affordability Paradox: The Picture in 2025, suggest that the issue is not affordability in terms of income but rather overly restrictive lending regulations that continue to act as a brake on first-time buyer activity.

The report builds on IMLA’s 2021 analysis, which originally identified a shortfall of 2.7 million first-time buyers who might have been expected to purchase a home in the years following the global financial crisis but had failed to do so.

That number has now increased by a further 800,000, pointing to a deepening problem despite the resilience of the mortgage market.

Notably, IMLA’s latest research highlights that 330,000 first-time buyers secured a mortgage last year – 15% above the long-term average over the past 17 years – even amid a higher interest rate environment.

The figure, it argues, is a clear indication of suppressed demand and unmet homeownership aspirations.

Kate Davies, executive director of IMLA, said the figures underline how many otherwise creditworthy borrowers are being thwarted by rules that do not reflect their true ability to meet repayments.

“Our research backs up several previous studies which conclude that far more people could reasonably afford to buy homes and comfortably service a mortgage than current regulations and attitude to risk allow,” she said.

Davies cited the loan-to-income (LTI) flow limit in particular as a key impediment. The rule, which restricts the proportion of mortgages that lenders can offer at higher income multiples, was introduced in the wake of the 2008 crash to contain systemic risk but is now seen by some as an outdated mechanism that prevents sensible borrowing decisions.

While lenders have responded with innovations such as longer mortgage terms, higher LTV products and more flexible income assessments, Davies said that regulatory reform and a shift in public perception are both needed to unlock the market.

CHANGE THE NARRATIVE

“The government’s promise to reduce financial services red tape is welcome, and we await the outcome of the FCA’s Mortgage Rule Review with interest. But we also need to change the narrative which tells aspiring first-time buyers that homes are unaffordable,” she said.

In addition to the financial implications, IMLA argues that delayed access to homeownership has broader societal impacts. Citing previous research, the association notes that buying a home can confer long-term financial benefits worth hundreds of thousands of pounds over a lifetime compared to renting, alongside gains in security and wellbeing.

“First-time buyers are the lifeblood of a healthy housing market,” Davies said. “We need to focus on unlocking the huge pent-up demand illustrated by this report by making it easier for people to take that first step onto the property ladder, and broadcasting the message that, contrary to common perception, millions more can afford to buy their own home.”