An IMLA survey of 506 mortgage brokers carried out in December found that eight out of ten first-time buyers unable to secure a mortgage through their broker were choosing to rent instead.
Brokers expect business levels to drop in all sectors but are predicting that buy-to-let will be particularly hard hit.
Peter Williams, executive director of IMLA, says the government needs to start giving buy-to-let lenders support so that the rental market can make up for the downward trend in home ownership.
He says: “If we are to see a genuine contraction in homeownership in the UK, the government must put its money where its mouth is.
“They must promote non-banks to the bank bailout premiership.
“Currently, broker-facing lenders who traditionally serve the buy-to-let market are being frozen out by the government.
“Without support helping lenders to free up cash, the buy-to-let market will suffer further retrenchment.”
Williams adds: “This is a vital component of the UK housing market and the government are currently ignoring its need.”