According to research from the Intermediary Mortgage Lenders Association (IMLA), this is an increase from the estimate of 2.7 million first-time buyers it released in 2021.
The report said there were around 330,000 first-time buyers in 2024, which was attributed to “pent-up demand”. This is well above the average of the past 15 years.
IMLA said a major factor could be “overly stringent regulation” and welcomed government efforts to reduce regulation in the financial services sector.
The trade body called on regulators to “re-examine the current configuration of rules” and to look at the loan-to-income (LTI) flow limit, as it has a “disproportionate impact on first-time buyers”.
House-price-to-earnings ratio and mortgage rates impacting each other
IMLA said the house price to earnings ratio has fallen from its peak of 8.2 times income in 2022 to around 7.2 times income since 2015.
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The report continued on to say that during that period, house prices rose by 2%, with a fall in 2023 followed by a “modest recovery”.
Over the same period, wages rose by 16%, which the research said was “driving the fall” in the house price to earnings ratio.
Looking at mortgage rates, IMLA said that after peaking at 5.5% in late 2023, rates have “eased significantly”, sitting at an average of 4.8% in recent months.
The report noted that the percentage of income on mortgage interest has been “largely unchanged” between 2023 and 2024 at around 15%, which is in line with levels last seen in the financial crisis of 2008-09 and the long-term average.
“It is this rise in mortgage costs that explains the fall in the house price to earnings ratio: buyers are more stretched so they cannot afford to offer as much relative to their income as they did just a few years ago,” IMLA said.
The average new mortgage relative to the income of the purchaser was around 3.2 times in 2024.
The report noted that a similar trend can be seen in first-time buyers, with the average first-time buyer spending around 16.7% of their income on a mortgage in 2024.
First-time buyers since 2009 have put down a deposit equal to 184% of UK earnings. This fell to 175% in Q1 2025.
IMLA said the largest factor in the change in the house price to earnings ratio was mortgage rates, which went from the lowest rates on record between 2020 and 2022 to the highest level seen since the financial crisis by late 2023.
‘More action is needed to help first-time buyers’
Kate Davies, executive director of IMLA, said the 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 continued: “Clearly, more action is needed to help first-time buyers. In particular, the LTI flow limit restricting how many mortgages lenders can offer at higher loan-to-income levels is blocking many sensible borrowers from buying their first home.
“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 [that] tells aspiring first-time buyers that homes are unaffordable.”
Davies said many lenders were innovating with longer mortgage terms, extended income multiples and higher loan-to-value (LTV) products, but government and regulators need to “follow through on the necessary rule changes to really move the dial”.
“First-time buyers are the lifeblood of a healthy housing market, and homeownership confers a range of benefits on the population, from security to improved mental and physical wellbeing, not to mention enormous long-term financial benefits. An earlier IMLA study found that someone buying a home initially with a 95% LTV mortgage could be £352,000 better off over 30 years than someone who continues to rent privately.
“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,” she concluded.
