Landlord loans accounted for 11.5% of all mortgage lending last year, according to the latest figures from trade body the Council of Mortgage Lenders.
This was a 17% increase on the previous year.
Total lending added up to £16.4 billion, compared to £13.8 billion 12 months’ earlier – the highest since the peak of the housing boom in 2007.
In the final three months of last year, around 36,700 buy-to-let loans were advanced, worth a total of £4.6 million. This is up from 34,000 loans worth £4.2 billion in the previous quarter, and a rise also on the fourth quarter of 2011, when 34,200 loans were made to a total value of £3.9 billion.
During 2012, 136,900 buy-to-let loans were taken out, and nearly half were remortgages.
At the end of the year there were 1,445,300 buy-to-let loans in place, accounting for 13% of all mortgages.
Average deposits on buy-to-let mortgages were 25% and the average minimum rental cover was 125%.
Just 1.14% of buy-to-let loans were in arrears by more than three months by the end of the year, compared to 2.03% of owner-occupier mortgages. However, the annual repossession rate was 0.48% - higher than the equivalent level of 0.27% for owner-occupiers.
Paul Smee, director-general of the Council of Mortgage Lenders, said the buy-to-let market is benefiting from strong tenant demand, and this is likely to continue.
“Loan performance compares favourably with the owner-occupier sector, and the overall outlook for the buy-to-let sector is positive,” he said.
"Landlords who can demonstrate a strong track record are in a good position to expand their portfolios. However, new potential landlords need to tread carefully before entering the buy-to-let market; considerations such as landlord licensing reinforce the need for potential landlords to gain a strong understanding of the legal and operating environment.”
The CML says during 2013, landlords will find out if buy-to-let lending under the proposed European Directive for Mortgages that is being finalised, Smee explained.
If the EU does regulate buy-to-let, landlords will find borrowing for investment much harder under strict new rules.
