First-time buyers were the hardest hit by the tightening lending conditions, said the firm.
This was reflected in loans for the purchase of typical first-time buyer property worth up to £125,000 falling to their lowest level since July last year.
There just 11,307 such loans in May, down 3% from 11,919 in April.
Increasing funding costs and exposure to the eurozone debt crisis forced banks and building societies to reduce their high loan-to-value lending in May and up rates on new mortgages.
The number of house purchase loans to borrowers with small deposits fell for the fourth consecutive month.
There were just 5,457 loans to borrowers with a deposit of less than 15% in May, falling from 5,597 last month.
Only 1,213 of those loans were to borrowers with a deposit of less than 10% (accounting were less than 3% of total new loans), compared to 1,434 in April, illustrating it is becoming more difficult for borrowers to access high LTV loans.
The market has begun to steadily regress following a marked recovery over last autumn and early winter, said e.surv.
In the fourth quarter of 2011 there was an average of 6,670 loans per month to borrowers with a deposit of less than 15%.
Over the quarter up to May the average has fallen sharply to 5,421 per month.
This reflects the Bank of England’s survey of credit conditions for the second quarter of the year, which said although demand for low deposit mortgages has increased, banks will be forced to reduce the number of loans for first time and lower income borrowers.
To show just how far off high loan-to-value lending is from recovering to its pre-2008 levels, there were 39,051 loans to borrowers with a deposit of under 15% in May 2007, almost four times as many as in May this year.
House purchase loans were up 8.7% year-on-year, however May last year was a weak month by historic standards (in May 2011, loans for house purchase were 7.2% lower than in May 2010).
Richard Sexton, business development director of e.surv, said: “The market has shown real fighting spirit and for the time being has stood up well to the eurozone crisis.
“The effects have been widely felt in the form of higher rates and fewer loans but by no means has lending fallen off a cliff.”
e.surv added that UK lenders are terrified by the prospect of a messy Greek exit from the euro, which could come quickly after Sunday’s election.
“If it happens, the effects will resound loudly throughout the mortgage market,” said Sexton. “As ever, first time buyers will be hit the hardest.”
