Buy-to-let mortgages set for 2008 growth

Buy-to-let mortgages are set to grow to represent 15 per cent of all new mortgages by the end of this year, according to new research.

The figures, published by lender Paragon, indicated that 2008 will see significant growth within the buy-to-let sector, driven by continued strong levels of demand and flat house prices.

At the same time, the figures revealed an increase in rental yields, after almost two years of a stable level of six per cent, over the course of this year yields are expected to increase to 6.5 per cent.

Commenting on the figures, John Heron, the lender's managing director, said: "We expect 2008 to be a really strong year for rental demand, presenting plenty of opportunities for established buy-to-let landlords as well as well briefed new entrants to the market.

The key factor will be a lower level of confidence elsewhere in the market, which will drive tenant demand higher while house prices - the cost of a landlord's raw material - will at best be flat."

Figures published late last year by the Council of Mortgage Lenders envisaged house price growth of just one per cent in 2008.

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