Nearly five million borrowers would have been expected to buy their first homes since the financial crisis, but only 2.5m people became first-time buyers since 2008, according to the latest report released by the Intermediary Mortgage Lenders Association (IMLA).
This means more than 2.4m Britons have yet to make their first step onto the housing market.
IMLA predicted total gross mortgage lending, loans for house purchase and remortgaging to remain stable in 2019 at £269bn, £156bn and £102bn, respectively.
However, looking forward, IMLA expects a slight dip in both lending and remortgaging in 2020.
High LTV lending boost
Encouragingly for first-timers, lenders are continuing to aim for more 70-90% loan-to-value (LTV) lending as arrears remain at historic lows and low mortgage rates support affordability.
However, IMLA found that while there has been a sustained increase in lending over 75% and up to 90% LTV, lending above 90% LTV still remains very subdued, not surpassing five per cent of total lending in any quarter since the financial crisis.
Buy-to-let (BTL) activity remains under pressure as landlords come to terms with increased tax bills following the 2015 reforms.
The report predicted that gross BTL lending will fall six per cent to £36bn in 2019 and £35bn in 2020, with landlords purchasing 59,000 rental properties in the coming year, down from 66,000 in 2018.
Mortgage brokers undertook 74 per cent of mortgage lending by volume in 2018, the highest share on record, and IMLA expects this trend to continue.
The report noted that intermediary lending will rise to £169bn in 2019, and £171bn in 2020, as the share of lending introduced by intermediaries rises to 75 per cent in 2019 and 76 per cent by 2020.
Failing first-time buyers
Kate Davies, executive director at IMLA (pictured), said the continuing combination of steady inflation and low unemployment should underpin the housing and mortgage markets in 2019 and 2020.
She added: “Intermediary-driven lending continues to go from strength-to-strength as more people than ever turn to a broker to find the most suitable mortgage.
“But the mortgage market is not fully functioning as one would expect. Record low rates and historically low loan-to-value (LTV) ratios, coupled with cash and household equity being injected into the housing stock, are more usually associated with a continuing period of recession.
“These are symptoms of a market that has failed to support first-time buyers and those moving up the housing ladder in the way it did for previous generations.”
Davies noted that although low mortgage rates were supporting borrower affordability, high house prices and regulatory constraints on lending were making it harder for borrowers to move onto the housing ladder.
“With the mortgage market now following a gentle trajectory, it is a good time for policy-makers and regulators to reassess the costs and benefits of the present regulatory structure, recognising that the impact on those locked out of homeownership can be considerable and lasting,” she concluded.