The building society has warned that mortgage reforms introduced in the wake of the 2008 banking crisis are “too tilted” towards supporting financial stability and that first-time buyers are being priced out of the property market.

A report commissioned by the Building Societies Association has called for an overhaul of affordability and repayment rules which they say have contributed to a steady decline in first-home buyer mortgages since the mid-2000s.

The BSA has 42 members, serves 26 million customers in the UK and holds more than £500 billion in assets. The association said a 15 per cent cap on the amount of home loans lenders can offer, with loan amounts of 4.5 times a borrower’s income, should be reviewed.

It is also pushing for more flexible mortgage products, allowing for part-repayment, part-interest-only loans that can change over the life of the loan.

The latter proposal echoes policy before the 2007-08 financial crisis, when households often held interest-only mortgages, which could cut monthly repayments almost in half. These mortgages allowed borrowers to take out larger loans they could never repay, but faced a crackdown from regulators after the banking industry collapsed.

The BSA said the regulations should now be reviewed. “Since the financial crisis, a key feature of the mortgage market has been the compromise between financial stability and the number of first-time buyers, an important trade-off,” the report said.

“The balance has tipped in favor of financial stability over the past decade, and this inevitably comes at a cost, with many people being excluded from home ownership, particularly those on a single income, below average income, or with unstable income and wealth Fewer people.”

The association said it was aware that looser rules had previously led lenders to take greater risks, including in the early 2000s and 1980s, but “with poor endings”. “There are no right answers to the appropriate balance, but there needs to be an honest debate about the costs and benefits,” the BSA said.

Chris Sykes, technical director at mortgage broker Private Finance, warned that more flexible products could complicate lenders’ affordability tests, but were not impossible.

“Mortgage flexibility is important for first-time buyers,” he said. “I would support the return of some low starting mortgage options that either load more interest rates on the back end of the product or the product allows for a higher percentage of interest initially, thereby lowering interest rates over time.” Lender How to prove the affordability of such products will be difficult, and regulators can work with them to help.”