More than 2.4m households who expected to have bought property for the first time after the financial crisis are still waiting.
Research by the Intermediary Mortgage Lenders Association (IMLA), based on population growth, found that almost 5m borrowers would have been expected to buy their first homes since the financial crisis, but that only 2.5m people became first-time buyers since 2008.
The trade body warned that although low mortgage rates are supporting borrower affordability, high house prices and regulatory constraints on lending are still key barriers to getting on the property ladder.
It said a significant jump in lending would be required to help those who are still waiting to purchase their first home, but IMLA is predicting the value of loans for house purchase would remain stable at £156bn this year.
IMLA also warned that landlords are feeling the effects of the buy-to-let tax clampdowns and predicted lending would drop 6% during 2019 to £36bn, with landlords purchasing 59,000 rental properties in the coming year, down from 66,000 in 2018.
Kate Davies, executive director at IMLA, said: “We have had a robust recovery in lending volumes since the low of 2010, and the continuing combination of steady inflation and low unemployment should underpin the housing and mortgage markets in 2019 and 2020.
“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 isn’t fully functioning as one would expect. Record low rates and historically low loan-to-value 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.
“Although low mortgage rates are supporting borrower affordability, high house prices and regulatory constraints on lending make 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 home ownership can be considerable and lasting.”