Mortgage approvals recovered in June but there are warnings that property buyers are still hampered by a lack of choice of products as well expectations that lending criteria will have returned to pre-Covid-19 conditions.

Bank of England data showed there were 40,000 new mortgage approvals for house purchase last month.

This was up from the record low of 9,300 in May, but still below February’s pre-Covid level of 73,700.

But commentators aren’t getting too excited as they say while more approvals are a good sign, there is still a lack of property and mortgage supply

David Ross, managing director of Hometrack, said: “Despite recent Government efforts to turbocharge an already buoyant market with a Stamp Duty holiday, further progress may be stifled by the 10% shortfall in property supply compared to 2019, and a reduction in mortgage products and delays in approvals.

“While the hangover from Covid-19 lingers, our data shows mortgage applications continued to rise in July, showing demand from home movers increasing to over 20% higher than July 2019.

“Many of these applications run the risk however of being unsuccessful, denying potential home owners the twin benefits of no Stamp Duty and low interest rates, and in turn stifling the positive network effects of home moving on the economy.”

Property website Twindig warned mortgage rates have also gone up so home loans are likely to be more expensive, while Andrews Property Group said some borrowers aren’t as proceedable as they think due to the new more cautious lending environment and fewer products.

Sam Harhat, head of financial services at Andrews Property Group, said: “There is intense competition among lenders at 60% and 75% loan-to-values (LTVs), and that area of the mortgage market remains well-served and robust.

“At higher LTVs there’s a growing disconnect between what borrowers believe they can get from lenders and what lenders, against an increasingly fraught economic backdrop, are prepared to offer.

“Some of the demand we’re seeing right now is based on pre-Covid-19 expectations rather than the new reality. As a result, even if certain borrowers think they are proceedable, often they are not.

“In February, there was a wealth of 95% LTV products available, today there’s one, maybe two.

“Even at 90% loan-to-value, there are now just tens rather than hundreds of products.

“Lenders are retreating from more leveraged mortgages in exactly the same way that they did in 2008 during the global financial crisis.”

Harhat added that the lack of mortgage products for new buyers means the Stamp Duty holiday is helping those already on the ladder more than those aspiring to get on it.

He added: “The Government could do worse than consider reintroducing a state-backed mortgage indemnity guarantee on the highest loan-to-value products.

“This would give lenders the peace of mind to continue servicing first time buyers and other borrowers with smaller deposits.”