The first signs of cooling-off in the buy-to-let market are being seen, says Nationwide's specialist lender UCB Home Loans.
Figures from UCB indicate that higher house prices and increasing interest rates are leading to a gradual slowing of buy-to-let purchases.
It says rental returns of 4 to 8 per cent can still be found in areas such as Sheffield, Manchester, Liverpool and Blackpool but yields are declining in areas such as Edinburgh where the ratio of landlordto tenants is growing.
The report says this is due partly to higher prices and also to lower rents. But while BTL lending is starting to fall in Edinburgh, there has been increased activity in Glasgow and the West of Scotland.
CML figures show BTL lending continued to grow in the first half but at a slower rate than last year. At the end of June, there were 473,000 BTL mortgages worth £46.8bn outstanding compared with 427,500 mortgages worth £39bn at the end of last year.
BTL arrears remain low, with only one in 240 loans experiencing arrears of three months or more. This is about half of the mainstream level.
Managing director Charles Reed says: “The market is still very buoyant, as would be expected in a sector which is relatively young. However, we are seeing the first signs that enthusiasm is calming down a little in some areas as rising interest rates and increased prices have a cooling effect.”