The Intermediary Mortgage Lenders Association (IMLA) said that the Funding for Lending and Help to Buy schemes had been introduced without consideration for the long-term housing and mortgage markets.

The body called on the government to open up a dialogue with the mortgage industry to help clarify government plans and develop suitable aims for the market.

A report commissioned by the trade body found that by 2020 a third of young households would be owner-occupied, half the number seen in 1993.

IMLA added that increasing levels of regulation by the UK government and European Union was stifling both product innovation and levels of lending.

Peter Williams, executive director of IMLA, said:

“In the wake of the recession there has been a growing appetite for rebuilding the housing and mortgage markets in a way that is sustainable through the economic cycle.

“Limiting the risk for borrowers and lenders is of course a vital part of this process, but there are wider implications for households, the market and the wider economy that simply cannot be ignored.

“Generations of Britons have been raised with the ambition of owning their own homes, which has become a key part of our national identity. But this goal threatens to disappear from view unless we consider what kind of market we want to create for the future and what can be achieved within the scope of mortgage regulations and available finance.

“There is a clear onus on lenders to ensure mortgage products are simpler to understand and provide customers with a long-term service that caters to their evolving needs.

“Beyond that, we urge the government to recognise and act on these critical issues that will shape the future of the market, so we are not left dealing with unintended consequences further down the line.”