Figures from the Building Society Association (BSA) showed the number of loans approved by societies was down 5 per cent on the same quarter in 2016 at 112,340, and broadly the same as in the first quarter of 2017.
Building societies were responsible for 30 per cent of the growth in the mortgage market, contributing £3.3bn net lending out of the total £11.2bn across the market.
Joseph Thompson, business economist at the BSA said many homebuyers preferred to deal with a building society, particularly if they have a complicated financial situation.
He said: “They can take a more personal approach to lending. It is a challenging market for those looking to buy a home. Choice is limited as the number of properties coming on to on the market has fallen, and the contribution from new-build is still too low.
"At the same time, house-prices have been rising faster than earnings putting additional financial pressure on homebuyers. These challenges can be seen in lower numbers of mortgage approvals.
"As none of these factors is likely to change this year, the number of property transactions is likely to remain relatively weak.”
The BSA said savings balances with building societies increased by £3.3bn, down 51 per cent on the £6.8bn rise in the same period in 2016 but up substantially on Q1 2017 when they increase by £1bn.
Building societies have an 18 per cent share of savings balances in the UK.
David Hollingworth, of mortgage brokers London & Country, said building societies were offering competitive mortgage deals in many areas, with larger providers such as Nationwide providing a good range of deals.
He said: “Some of the smaller societies are becoming well known for being more flexible on criteria such as age and can take a case-by-base approach, which is also attractive."