Re-mortgaging has become increasingly popular in the buy-to-let market, according to a report issued today by Nationwide's specialist subsidiary, UCB Home Loans.

This method of re-investing accounted for 39% of gross lending in the first half of 2003.

"The market has seen a big increase in the number of re-mortgage applications received, as people's initial benefit periods for fixed or capped rates come to completion," says Charles Reed, managing director at UCB Home Loans. "Investors are also taking advantage of increases in property prices by re-mortgaging and ploughing the money into new purchases."

Council of Mortgage Lenders figures show that gross buy-to-let lending totalled GBP7.7 billion in the first six months of 2003, compared with GBP6.7 billion in the second half of 2002. The total size of the market at mid-2003 was 334,800 buy-to-let mortgages worth GBP31.2 billion. Figures for the last six months of the year will be available in March.

Many would-be first-time buyers are now renting property whilst they save for their deposit, but the larger number of rental properties available is leading to higher expectations regarding the standard of property that they rent.

Landlords can generally expect to receive between 7% and 9% gross annual rental return in more active parts of the country, and nearer 5% in areas where house price rises have slowed down and the ratio of landlords to tenants is higher.

"Investors should take a long-term view of returns over a ten to fifteen year period when considering a buy-to-let investment," says Charles Reed.

The growth of the buy-to-let sector continues, says the report. However, the rate of growth is now slowing and this trend is expected to continue over the next couple of years.

Interest in purchasing buy-to-let property has shifted towards more northern areas. Latest figures from the Association of Residential Letting Agents show that 50% of all new buy-to-let mortgage lending now takes place in the Midlands, the North, Scotland and Wales.

The UCB Home Loans report refers to a number of areas in which buy-to-let activity is buoyant, including Bristol, Southampton, Leeds, Manchester, Liverpool, Newcastle and Glasgow.

A full copy of the report is available from the media section at www.ucbhomeloans.co.uk