Homeowners have started to re-enter the property market with a view to snap up a bargain – but first-time buyers are still frozen out.

The Royal Institution of Chartered Surveyors (Rics) new buyer inquiry research, points to many potential buyers believing the market had reached a bottom.

For the third successive month, Rics reported an increase in new buyer inquiries, with 71 per cent of chartered surveyors attributing this rise to lower house prices.

Only 35 per cent believed the rise was due to lower mortgage rates.

Simon Rubinsohn, Rics chief economist, said: “Interest from owner occupiers is likely to persist over the comings months as those with large deposits look to capitalise on the drop in house prices.

“However, a sharply deteriorating employment picture may eat away at this improvement in sentiment, pushing potential buyers back to the sidelines. To prevent this happening and help restore an orderly housing market, the government urgently needs to address the issue of the availability of mortgage finance.

“It is essential that guarantees for residential mortgage backed securities are introduced sooner rather than later.”

Some 74 per cent of chartered surveyors reported it is existing owner occupiers who are driving the renewed level of interest, while 38 per cent of surveyors indicated investors are coming back into the market.

Only 23 per cent thought first-time buyers are a factor in the market interest rise.

Data from the Intermediary Lenders Association (IMLA) back up the view first-time buyers are still unable to get into property.

The IMLA reports 59 per cent of first-time buyers were unable to get a mortgage in Q4 of 2008.

Some 56 per cent of brokers surveyed said the reason they couldn’t find a mortgage for a first-time buyer was that the most suitable product wasn’t available via intermediaries.

Eight out of ten of those first-time buyers who couldn’t get a mortgage through their broker opted to rent instead.

Peter Williams, executive director of IMLA, said: “The first-time buyer end of the market has been hit extremely hard by lenders tightening their LTVs. For youngsters without a substantial deposit, the only alternative is renting.”

The research by Rics points to first-time buyers also losing out as the fall in sterling attracts foreign buyers.

Almost one in ten respondents suggested overseas buyers were now looking for opportunities in the UK residential market, benefitting from favourable currency movements.

Chartered surveyors reported 95 per cent of existing houses were the most popular type of dwelling for those enquiring and only 32 per cent reported interest in flats.

New build properties remain an even less attractive proposition for potential buyers, according to the Rics survey.