The number of buy-to-let mortgage loans reached its highest level for four years last year, the latest figures show, as record rents encouraged landlords to expand their property portfolios.
Gross buy-to-let lending reached £16.4bn over the year, up 19% on the £13.8bn advanced in 2011, the Council of Mortgage Lenders (CML) said.
The total number of buy-to-let mortgages outstanding at the end of 2012 jumped to 1.4m, or 13% of all mortgages, up from 12% in 2009 and 9.6% in 2006.
In total, 136,900 of the loans were advanced during 2012, the highest number since 2008 – though still far from the high of 346,000 seen in 2007.
The CML said the buy-to-let market was benefiting from strong tenant demand, "which is likely to continue". Its director general, Paul Smee, added: "The overall outlook for the buy-to-let sector is positive. Landlords who can demonstrate a strong track record are in a good position to expand their portfolios."
Jonathan Harris, director of mortgage broker Anderson Harris, said the figures reflected greater numbers of would-be first-time buyers turning to renting while they struggle to get a foothold on the housing ladder. "This is pushing up rents, making the sector increasingly attractive to investors," he said.
The CML also said the number of homes repossessed by mortgage lenders in the last three months of 2012 was the lowest since 2007, but a greater number of households ended the year struggling with large arrears.
There were 7,700 properties repossessed in the fourth quarter of 2012, down from 8,200 homes in the previous three months, and the lowest three-month figure since the fourth quarter of 2007.
The CML said the figures showed lenders were trying to keep borrowers in their homes and are only taking possession "as a last resort".
In total, there were 33,900 repossessions in 2012, down 9% from the 37,300 repossessions seen in 2011.
Mortgage arrears cases were also down, with 157,900 households ending 2012 with arrears of 2.5% or more of the mortgage balance, compared with 161,400 at the end of 2011.
However, the number of households in arrears equal to 10% or more of their mortgage balance increased, from 28,200 at the end of 2011 to 28,900 at the end of 2012.
"Households fall into difficulty for a variety of reasons, most of which cannot be anticipated," Smee said. "Wherever possible, lenders will work with borrowers to manage periods of temporary financial difficulty and enable them to keep their home. Anyone worried about their situation should talk to their lender, who will try to help them."
Harris said borrowers in trouble should ideally seek help before they miss a payment. "Many households are still struggling financially," he said. "While base rate is expected to stay at 0.5% for the foreseeable future, there are thousands of people who have already got into difficulty and are struggling to get out of it.
"Only those with significant equity cushions can access the market-leading deals. Those up against it and in danger of having their homes repossessed don't have this luxury so can't remortgage on to the cheapest rates. Subsequently, some homeowners are getting into difficulty paying their mortgage on top of high living costs, low wage rises, and in some cases losing their jobs."Repossessions made by second-charge mortgage providers were also down in 2012, according to the Finance & Leasing Association. The repossessions, which can be ordered on the back of failure to repay any secured debt, fell by 24.1% in 2012 from 827 to 628.
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