Tough mortgage rules are stopping hopeful homeowners from getting on the property ladder, according to a new report.

The Intermediary Mortgage Lenders Association (IMLA), a group representing mortgage lenders, is urging the government to take action. They say the current rules are outdated and are blocking aspiring homeowners, especially first-time buyers.

What’s the problem?

One major sticking point is the “loan-to-income” limit. This rule, set by the Bank of England, limits the number of mortgages that banks can offer to borrowers who want to borrow more than 4.5 times their income. Currently, only 15% of a bank’s mortgages can be given to these higher-income borrowers.

IMLA argues this limit unfairly disadvantages those trying to get their foot on the property ladder.

First-Time Buyers Feeling the Squeeze

Kate Davies, a spokesperson for IMLA, explained, “The government can help future first-time buyers by looking at the rules making it tough to buy a home. The current affordability rules need a rethink, especially the loan-to-income limit. This rule seems to contradict the government’s aim of making homes affordable.”

IMLA’s report highlights that buying a home has become much harder in recent years. While the period between 2013 and 2022 saw low mortgage rates, the number of first-time buyers was significantly lower than in a similar period between 1993 and 2003 (330,000 compared to 500,000). The report attributes this difference to the stricter regulations introduced after the 2008 financial crisis.

Rising Rates Add to the Problem

To make matters worse, rising interest rates have further compounded the issue. In 2021, 405,000 first-time buyers secured mortgages. This figure plummeted to just 257,000 last year – a stark illustration of the impact of rising rates.

The report also points out a worrying trend: it’s now more expensive to buy than to rent in most parts of the UK. Only the North West, Scotland, and Northern Ireland remain more affordable for buyers. This marks a significant shift from 2021 when buying was cheaper than renting across the entire UK.