Its research revelealed that in May purchase approvals for homes under £125,000 accounted for 23% of all purchase approvals, compared to 27% in April and below the average of 24% for the last year.

By comparison, purchase approvals in the highest price brackets rose steadily, with wealthier buyers left far less affected by tightening criteria

e.surv found that the average LTV for mortgages approved in May dropped slightly from 61.0% in April to 60.4%, reversing a seven-month trend of improvement.

The bottom end of the market was most affected, decreasing or remaining static on all house bands up to £376,000.

The average LTV for first-time buyer properties under £125,000 fell more sharply from 67.8% in April to 67.1%, while purchase volumes in the 90% to 100% LTV bracket grew at less than half the pace of the overall market.

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Overall purchase approvals rose 1.1% in May driven by higher value homes, e.surv said, up from 45,166 in April to 45,675.

However, they remain 7.9% down on May 2010.

Richard Sexton, business development director of e.surv, said: “With base rate hikes seemingly off the agenda for at least another six months, it’s great timing for homeowners and buyers to benefit from falling mortgage rates.

“Those with the least equity in their homes need cheaper rates most, so it is important lenders don’t make it too difficult to qualify for the best mortgages. Tightening criteria in May are going against this grain. Some lenders are ahead of the pack and are offering good deals, but for others it’s not enough just to advertise a good headline rate.”