A decline in new buy to let lending in the first half of 2008 indicates the sector was affected by the same conditions as the wider mortgage market.

New data from the Council of Mortgage Lenders showed there were only 144,600 new buy to let loans in the first half of 2008, down from 176,500 in the second half of 2007 and 169,500 in the first half of 2007.

The shortage of mortgage funding limited activity across the mortgage market including the buy to let sector, which boasts a significant number of lenders who rely on wholesale funding.

Despite that, the half-yearly decline was lower than in the wider market – the number of buy to let loans in the first half of 2008 decreased by 18 per cent from the second half of 2007, while the number of house purchase and remortgage loans in the wider market decreased by 28 per cent.

The number of outstanding buy to let mortgages continued to rise, and there are now 1,103,000 buy to let mortgages in the UK worth £132.5 billion.

On average, lenders offered a maximum loan of 83 per cent of the value of a property in the first half of 2008, down from 85 per cent last year.

Some landlords are encountering higher mortgage rates, as a result of the credit crunch, while being unable to increase rents in the short term.

CML director general, Michael Coogan, said: “The shortage of mortgage funding is creating similar problems for buy to let landlords as it is for other borrowers. However, we expect the rental market to remain underpinned by strong demand, partly because some people who would like to buy a home are being forced to carry on renting for now.”