July 23 2014 Latest news:

The number of properties bought with buy-to-let mortgages increased by nearly 85,000 last year, boosted by a strong demand for rental properties.

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The figures from the Council of Mortgage Lenders (CML) showed there were about 35,000 buy-to-let loans advanced during the second quarter of 2011, worth a total of £4bn – almost identical to the previous quarter.

But on an annual basis, that compared with 26,300 loans advanced a year earlier, worth £2.9bn.

The market remains subdued compared with the pre-crash days – in the third quarter of 2007, more than 93,000 buy-to-let loans were agreed – but the CML said it was showing good signs of recovery.

“Buy-to-let lending continues to perform well,” said CML director-general Paul Smee.

“Demand for rented property remains high, so the rationale for buy-to-let remains strong, and there is little reason to foresee any change to this positive outlook for the sector.”

Jonathan Samuels, chief executive of Dragonfly Property Finance, said: “Buy-to-let is nowhere near the giddy heights of 2007 but these latest figures confirm that it’s on its way back.

“The sector is one of the few beneficiaries of the current economic climate.

“Buy-to-let is being driven by the weakness of the economy and the continued caution of high street lenders at higher loan-to-values.

“Consumers are wary about buying and lenders are wary about lending. The result is soaring demand for rental property, which is pushing yields ever higher.

“Landlords are making hay while the sun shines, adding to their portfolios in order to increase their exposure. The fact that property prices are low is contributing to this trend.”

Meanwhile, the availability of buy-to-let mortgages has risen over recent months, according to the data-crunchers at Moneyfacts.co.uk

There are now 486 buy-to-let mortgage deals on the market, up from 386 a year ago.

The increased competition has also seen the average interest rates on these products come down.

Louise Holmes, a spokesman for Moneyfacts, said: “During the peak of the credit crisis, the number of buy-to-let deals shrank considerably as lenders saw it as a high risk area of the market.

“Many aspiring homeowners have had their property dreams dashed due to strict lending criteria and large deposits, meaning the only option left is to rent.

“This increase in demand for rental properties has resulted in a degree of competition returning to the buy-to-let sector, giving it a well-needed boost.

“These latest figures, particularly a reduction in the average rate, should make pleasing and encouraging reading for landlords and property investors.”

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