That is the conclusion of a report from the Intermediary Mortgage Lenders Association (IMLA) looking at the inter-generational divide in the housing market.
Rob Thomas, principal researcher at the trade body and author of the report, suggested that the “conventional explanation” that first-time buyers have been squeezed out by house prices accelerating faster than wages was not supported by the data.
He argued that with mortgage rates having fallen substantially, the cost of servicing any given mortgage has eased considerably.
As a result “far from buyer affordability having deteriorated, affordability as measured by the proportion of income that the average first time buyer devotes to their mortgage payments has never been better”.
Instead he argued that the most significant factor holding back first-time buyers is the combination of much more restrictive lending criteria “and the subsequent regulatory changes including enhanced affordability requirements, the unavailability of interest-only loans and enhanced capital requirements for lenders which has raised the cost of offering high loan to value (LTV) loans”.
‘Extraordinary’ cost of not buying a home
The report also highlighted what it described as the “extraordinary” cost that comes from opting against homeownership.
It argued that even assuming there was no house price growth for the next 30 years, someone purchasing a property with a 25-year 95 per cent LTV repayment mortgage could be £352,000 better off than someone that continued to rent privately.
Thomas said: “Mortgage rates would have to exceed 11.5 per cent over the life of the loan before renting was as financially advantageous as buying.”
The report argued that the Financial Conduct Authority (FCA) has set its policy by focusing on people already in the housing and mortgage markets, and not taken account of those who might be excluded as a result of regulatory measures.
As a result, IMLA called on the government to commission a “thorough independent cost benefit analysis of mortgage regulation that factors in the cost to consumers who do not enter owner-occupation as a result of the hurdles that the current regulatory regime places on their ability to access mortgage finance”.