The government should relax restrictions on qualifying for a mortgage, which would allow first-time buyers to help lead the economic recovery out of the coronavirus, the trade body said.
Around 2.7m young households have been frozen out of ownership since the 2008 financial crisis, IMLA estimated.
Controls on the proportion of higher loan to income (LTI), and stress testing have created barriers to would-be buyers, it argued.
According to IMLA, there should be 500,000 first-time buyers a year in the UK – almost 150,000 more than the actual figure of 352,000 at the end of 2019.
The three per cent stressed rate that lenders must apply in the affordability calculation is “out of line with economic reality” now that long term government bond yields are well below one per cent, according to Kate Davies (pictured), executive director of IMLA.
She said: “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 also called for the industry and government to work together to find a successful long-term replacement for the Help to Buy scheme, which is due to be restricted to first-time buyers from 2021 and ended completely in 2023.
More than 260,000 properties have been purchased using the scheme since its launch in April 2013.