Low mortgage rates and a buoyant rental market have driven a dramatic rise in buy-to-let lending and loan values over the last year, CML figures show.
Overall BTL lending in the third quarter of 2013 hit 43,900 loans, up 36% on the same quarter last year. These loans were worth £5.7 billion in total, a rise of 43%.
Lending for BTL grew 0.7% in September with 14,600 loans advanced worth £1.9 billion in total.
Both BTL house purchase and remortgaging remain healthy.
Karen Bennett at Shawbrook Bank said the buoyant BTL market had been a main driving force behind the revival of the property market in the UK. "However, now is the time to be careful and not get carried away by market optimism.
"There needs to be caution on both sides as the current unusual conditions can’t last. Lenders need to be responsible about the funding they provide based on rental income as well as the experience of the investors they fund.
"Equally, there is a lot of excitement among investors, but they should keep a close eye on their portfolios to make sure that once the inevitable happens and interest rates rise, their properties generate enough rent to cover the mortgages.”
Andy Knee, chief executive of LMS, said the shortage of property supply is likely to drive prices even higher. “The market is being squeezed. More and more people are trying to come in but there are simply not enough houses to satisfy everyone.
"Low returns on savings and high rental costs mean that a spotlight is being shone on property as a potential means of investment. As a result, first-time buyers are finding themselves having to compete with landlords.
"The pressure in the market will continue to intensify and house prices will continue to rise until this dire need for more housing is addressed.”
Lucy Hodge, director of Vantage Finance, said demand for BTL products shows no signs of slowing. "It’s a long time since there have been enough products to satisfy property investors, and at the moment any new products are snapped up really quickly.
“There are still significant opportunities for lenders to fulfil demand in the BTL market and it would be exciting to see more creative solutions from lenders.
"Nevertheless, the increase in lending announced today is a positive reflection of the market’s current strength.”
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