9% of mortgages are buy-to-let

Nine per cent of all home loans are buy-to-let mortgages, figures from the Council of Mortgage Lenders (CML) reveal.

This is up from eight per cent in 2005, showing buy-to-let investing is on the increase.

Around 330,000 buy-to-let mortgages were taken out over 2006, worth £38.4 billion, the CML reports today.

There are currently around 850,000 buy-to-let mortgage loans taken out, with the number over three months in arrears dropping from 0.64 per cent by June 2006 to finish at 0.59 per cent by December. This is well below the 0.89 per cent figure for the whole the mortgage market.

"The buy-to-let market has performed even more strongly than the wider market over the course of 2006. With evidence from other sources of strong tenant demand, rising rents and falling void periods, buy-to-let looks set to continue to remain popular and successful," commented Michael Coogan, CML director general.

Alliance & Leicester's head of intermediary mortgages, Mehrdad Yousefi, said the figures were "encouraging" particularly as more than half of the buy-to-let lending in 2006 related to the purchase of new investment properties rather than remortgaging.

"There was a 20 per cent increase in buy-to-let in the second half of 2006 compared with the first half which would've been helped by attractive pricing and flexible lending policies in the market, along with the return of the portfolio landlords," he said.

Buy-to-let mortgage specialist the Paragon Group was also positive about the future of buy-to-let based on the new figures.

"Rising immigration, growing household numbers, expanding student population and the increasing tendency of young people to defer their first home purchase, all mean there is a need for greater flexibility in our housing stock. The private rented sector is ideally suited to meet that need," said Nigel Terrington, Paragon Group chief executive.