Home lending has plummeted by 19% since the start of the year, as there were 14,600 fewer loans in May than in January.
Purchase approvals in May were 3% lower than in April, standing at 61,202.
On an annual basis there was a marginal increase in lending last month, as there were 4% more house purchase approvals in May year-on-year.
Richard Sexton, director of e.surv chartered surveyors, said: “The mortgage market is losing some steam and undergoing a gentle cooling, as demand begins to simmer among homeowners.
“Uncertainty is one factor affecting home-movers. Some buyers are waiting to see if the market will begin to plateau before agreeing to pay the high price tag on new property. And that’s before adding in other moving expenses such as Stamp Duty.
“MMR triggered the beginning of the slowdown. It took time to integrate the rigorous financial tests into the mortgage application process, and to train staff in the new procedures. But as MMR becomes further bedded down into the lending process, it is having less of an impact.
“The continued slowdown comes off the back of falling demand among buyers further up the ladder – some of whom now see the home-buying process as too costly. This is not a cause for concern and the figures do not support recent media hype regarding a property bubble.”
High LTV lending increased in May, as there were 3% more loans to borrowers with a deposit of 15% or less of their property value than in April, and 40% more year-on-year.
The number of first-time buyers rose by 47% year-on-year in April aided by Help to Buy, according to the latest First Time Buyer Opinion Barometer from LSL Property Services.
Richard Sexton, director of e.surv chartered surveyors, added: “Demand isn’t letting up at the bottom of the market, as first-time buyers still have an unwavering appetite to own their own property.
“But the wind may be changing in the mortgage market. Last week, RBS became the second lender to impose additional restrictions on high LTV mortgages – which are typically the mainstay of first-time buyers.
“The extra measures are designed to reduce the fever in the market, but they may have some negative side-effects.
“While MMR demands individual investigation into each home-loan application, income multiple methods are a simplistic way of testing borrowers, and may rule out many deserving aspiring home-owners.”
There were 6% fewer homemovers in May, as there were 17,086 loans to borrowers with a deposit of at least 40% of the total value of their property in May 2014.
Help to Buy 2 has not stimulated the heat in the London property market, as just 5% of mortgages completed under the mortgage guarantee scheme since its launch in October 2013 were in the capital.
Only one in 20 home loans (5%) in the capital were to borrowers with a deposit of 15% or less of the total value of their property in May, compared to over a quarter of all home loans in Yorkshire (27%), the North West (25%) and the North East and Cumbria (25%).
Sexton said: “London’s market is being fuelled by demand from foreign investors and buy-to-let landlords looking to expand their portfolios, not just first-time buyers.
“The lure of London continues to attract workers, all of whom need somewhere to live. In fact, the ONS predict London’s population to top 10 million in the next 15 years.
“We need new homes now to help alleviate the strain on those looking to buy in the capital, and to prevent the problem growing as London’s population booms.
“We must act now by easing planning regulation, freeing up more land, and stimulating a large scale revival of building in and around London – or face a future property market short of accommodation.
“Axing Help to Buy would generate publicity, but it wouldn’t solve the real problem which is embedded far deeper into the fabric of the capital.”
