The Mortgage Monitor from chartered surveyors e.surv revealed that there were 65,113 house purchase approvals in May, down 1.7% from the 66,250 in April and the lowest number since May 2015 when 64,626 applications were approved.
Monthly declines were also seen in March, down 3%, and April, down 5.8%, equating to a fall of 10.5% in the quarter, and a considerable turnaround from the peak lending seen at the start of the year. In January and February 73,060 and 72,512 house purchase approvals were respectively granted.
Richard Sexton, director of e.surv, said the EU referendum was causing nervousness in financial circles.
“This political milestone could impact the UK’s economic outlook and slowing growth could pose problems of its own for both lenders and borrowers,” said Sexton.
“Juggling these challenges will be key to maintaining the current health of the mortgage market and lenders should brace themselves for possible surprises.”
The volume of small-deposit lending, to those with a deposit with 15% or less of the property’s value, also dropped slightly in May, to comprise 18.4% of total home lending – down from 19.1% the previous month. Meanwhile, lending to those with a deposit of 60% or more increased significantly, accounting for almost a third (30.7%) of all borrowing.
Sexton said more should be done to ensure first-time buyers have access to the mortgage market with smaller deposits.
“Given the demands of saving for a deposit, high loan-to-value lending continues to be crucial to helping aspiring buyers on to the ladder,” he said.
“Low inflation and rising wages can only do so much to combat climbing deposit demands. Meanwhile, some first-time buyer schemes like Help to Buy 2 are due to be phased out at the end of the year. This could curb first-time activity if it means the improvements made to support first-timers start to fall away.”
He said the solution to the problem is to increase housing supply which will drive down prices and make the mortgage market more accessible for those with low deposits.
The survey found that just London and the South East saw proportional increases in small-deposit lending, rising to 10% and 15% respectively. Meanwhile, the proportion of small-deposit borrowing in Northern Ireland stayed at 30%, continuing as the most first-time buyer friendly region in the UK.