Lending for buy-to-let rises by 18%
Some 33,200 loans worth £3.9 billion were advanced between April and June this year, an 18% increase on the amount of cash advanced compared with the same period last year, said the Council of Mortgage Lenders (CML).
Rents have soared in recent months as would-be buyers have remained trapped in the rental sector because they cannot raise a deposit or meet lenders' toughening criteria. Suggestions have also been made that many people are choosing to rent because of uncertainty surrounding the housing market.
However, the CML cautioned that buy-to-let lending is still recovering from a low point in 2009 and lending volumes remain at about a third of their peak in 2007.
A recent study by LSL Property Services, which owns chains Your Move and Reeds, found that average rents increased by 0.9% month-on-month in June to reach £718 a month, the third month in a row to experience a rise.
Ed Stansfield, chief property economist at Capital Economics, said buy-to-let lending is a "key prop" for the sluggish mortgage lending sector as a whole.
He said: "Landlords are typically less credit-constrained than first-time buyers, meaning that there is likely to be a steady demand from frustrated buyers for property in the private rental sector."
Mark Harris, chief executive of mortgage broker SPF Private Clients, said that relatively strong rental returns were attracting investors at a time when the housing market is generally difficult.
Mr Harris said: "While capital growth on investment properties is likely to remain subdued for some time to come, income is strong and returns favourable when compared with other investments. Buy-to-let is only going to grow in popularity as more lenders return to the market."
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