Mortgage approvals for first time buyers fell to their lowest level for nine months in April, according to the April Mortgage Monitor from e.surv chartered surveyors.

This was as a result of banks scaling back their lending to borrowers with small deposits, e.surve said.

Loans on typical first time buyer property (worth up to £125,000) fell to just 11,307 in April, 5% lower than in March, and 1.2% down on April last year. Banks blamed increasing mortgage funding costs and renewed fears over their exposure to the eurozone crisis for the reduction in lending.

e.surv found it is the third successive month in which first time buyer loans have fallen, confirming the Bank of England’s view that banks and building societies are pulling back from lending to borrowers with small deposits over the summer.

First time buyers were the hardest hit as banks reduced the availability of high loan-to-value mortgages in April in response to increasing funding costs and tightening credit conditions. There were fewer loans to borrowers with small deposits, as the number of loans granted to borrowers with a deposit of 15% or under fell to 5,309, well below the three-month average of 6,229.

In the overall market, loans for house purchases fell to 49,165 in April, a fall of 1.4% from March. Banks lent disproportionately to wealthier buyers, reflecting their reduced appetite for lending to riskier borrowers. Despite the 5% fall in loans for the cheapest property, approvals in all price brackets over £350,000 increased. This helped prevent overall purchase approvals falling more steeply.

The tighter lending conditions were evident as the average deposit on a house purchase loan rose above 40% for the first time since February 2011. April was the fourth consecutive month in which the average loan-to-value has fallen, suggesting it is becoming increasingly more difficult for borrowers to access high LTV loans.

Purchase approvals were up 7.4% compared to April last year, however April 2011 was a weak month by historic standards.

Richard Sexton, business development director of e.surv, said: “The market has shown real fighting spirit and stood up well to the economic malaise engulfing Europe and the UK economy. Up until the early spring mortgage lenders did a sterling job of coping with steadily increasing funding costs imposed by investor anxiety in the wholesale markets. They absorbed them, rather than passing them onto borrowers. This helped them cater for the rush of first time buyers looking to beat the stamp duty deadline, and helped boost activity in the housing market over the late winter and early spring.

“But we’ve reached a tipping point now. Banks and building societies can’t afford to sustain their current levels of high loan-to-value lending. In addition to their increased funding costs, they are also concerned about their exposure to the debt-riddled European countries, and the increasingly precarious state of borrower finances in the UK.

“As a result they’ve begun to scale back lending to first time buyers. If the Bank of England’s Credit Conditions Survey is anything to go by – in which lenders reported a drop in mortgage credit for the first time since summer 2010 – they’ll be forced to continue this trend into the early summer. Brighter times should return once the turmoil in the wholesale markets eases, and lending to first time buyers should begin to pick up again.”