Cash buyers are losing their grip on the property market as mortgage-backed house purchases rally, according to LSL Property Services PLC.

The percentage of cash buyers rocketed far above average in October 2008, when mortgage financing dried up and 37% of purchases were made in cash. However, in September 2009, the situation began to change as the percentage of transactions carried out by cash buyers began to drop. The percentage of residential property purchases paid for with cash decreased, falling to 33% compared to 35% in August.

David Brown, commercial director of LSL Property Services, said: “ These figures suggest a recovery in the provision of mortgage finance in the UK. When the availability of finance dried up, the bottom dropped out of the UK market and the housing market crashed. The only buyers left in the game were those with cash in hand. They were looking to get their cash out of the banks and into property assets while they were at rock-bottom prices. From October 2007 that remained the status quo - until this autumn. In September this year, things changed. The percentage of purchases made using cash is falling as lenders start to provide decent amounts of mortgage finance. ”

The increase in mortgage lending comes despite the FSA blocking new entrants from coming onto the market. Speaking in November, Hector Sants, chief executive of the Financial Services Authority (FSA), said the regulator had purposely deterred several new entrants to the market.

Sants said: “ In the deposit taking industry, we have worked to limit or reduce retail depositor exposures by forcing firms to exit the best buy tables or the market completely and we have deterred several new entrants to the market.”