The Office of Fair Trading (OFT) said it would conduct a market study into the sector, where companies bought property from struggling homeowners at a discount and then leased them back under strict terms.

The announcement came after this year’s Budget highlighted fears about consumer protection within the sector.

Adam Sampson, chief executive of charity Shelter, said, “This study is urgently needed, and comes on the back of vulnerable people losing their homes to some dishonest sale and leaseback companies.

“These companies encourage hard-up homeowners to sign up for what is plainly a very bad deal. Shelter has seen cases where homeowners have not only lost out financially after selling their homes to an sale and leaseback company, but also lack any right to permanently stay in their home and ultimately find themselves homeless.”

There are few concrete statistics on the actual size of the market, but most agreed it was likely to expand in the wake of the credit crunch, as economic troubles worsened and mortgage companies seized more houses.

The OFT said it would investigate whether targeted homeowners were making informed choices. Possible outcomes of the study included action being taken against companies suspected of breaking the law, or referring the entire industry for a full Competition Commission investigation.

Housing experts expressed concern that immoral companies were persuading vulnerable members of the public into accepting discounts on their homes in exchange for rental agreements only valid for a year or less.

Once that lease was up, lodgers could face significant rent increases or be forced to quit the property they previously owned.

Ray Boulger, of John Charcol, the mortgage broker, said the elderly were among the most likely to get into trouble by selling their home below market price to such companies.

The survey, by lender Mortgage Express, also revealed that six out of 10 advisers believed the current
market conditions had created good opportunities for buy to let investors.

According to the survey, almost half of the advisers said experienced landlords made up the majority of their of their client base.

Amateur investors had not made such a large impact, with only eight per cent of advisers reporting that this group had increased.

Jeremy Law, head of buy to let for Mortgage Express, said, "These findings reflect the confidence we are seeing from our portfolio landlords, who are in it for the long-term and believe the current market conditions present them with good buying opportunities.

"With rental demand increasing, it is not surprising so many landlords are feeling upbeat about buy to let."

Emma Tyler, senior consultant for Southend-based IFA The OFM Group, said, "I am not at all surprised by these statistics. Established landlords are making the most of the current property market and combined with a rise in rental demand you cannot deny the good opportunities being created.

"If anything I am concerned about the attitude of the other 40 per cent of advisers."

It is possible for landlords to claim against the cost of installing devices such as draught-proofing, loft insulation, floor insulation, cavity wall insulation, solid wall insulation and insulation for hot water systems.

The National Landlords Association has urged landlords to take advantage of the opportunity to claim a maximum of £1,500 per property against the cost of installing the items.

It said these items would not only improve the energy efficiency rating of the property but lower fuel bills for prospective tenants.

If insulation costs a landlord more than £1,500 to install, higher rate income tax payers could save as much as £600 and basic rate income tax payers could make a saving of up to £300.

In light of rising mortgage rates, this could provide a ray of hope for landlords attempting to “go green”.

From October 1, 2008, all rental properties in England and Wales with a new tenancy are required to possess an Energy Performance Certificate (EPC), which will inform prospective tenants of the property's energy efficiency.

This may encourage potential tenants to opt for a property that does not have such high energy costs.

Last week, David McMaster was formally inducted as ARLA president, taking over from Robert Jordan.

He expressed his desire to ensure landlords and buy to let investors have a clear understanding of what to expect from professional letting agents.

Mr McMaster has called upon ARLA members to promote the benefits of the association’s code of practice, client money protection and professional qualifications to landlords and tenants.

“In the current market, it is vital that ARLA members take every opportunity to reinforce the message we must promote to the public.

“They must use only regulated agents who are qualified in lettings and residential management. There is too much money at stake in rents, deposits and the value of people’s homes and investments to ignore the benefits of using a professional ARLA agent,” he said.

Mr McMaster believed many people would remain in the private rented sector for longer in the face of a slowing rental market and the credit crunch.

Reasons for this were that some people could have difficulty getting a mortgage or because they could not find the property of their choice.

But he said large parts of the rental market remained unregulated and left both landlords and tenants exposed to a poor quality of service or risk with their funds.

Reputable agents should be able to demonstrate client money Protection, separate bank accounts for all client funds, client accounts which are checked annually by an independent qualified accountant, professional indemnity insurance and membership of a tenancy deposit protection scheme.

They should also have an internal complaints procedure, operate under a code of practice that includes the obligation to submit to disciplinary action by an independent body, and employ professionally trained and qualified staff.

The Enhanced Capital Allowances (ECA) scheme was designed to reimburse landlords who made the positive step of greening their existing buildings.

But the British Property Federation has pointed out that the scheme exists only within the private sector of plant and machinery and has called on the government to broaden the remit for the ECA.

Andrew Teacher, spokesperson for BPF, said ECAs did not currently cover investment in the actual fabric of a building, despite the fact that was where the most significant savings could be found.

“We want the remit of ECAs to be broadened so the wider benefits can be realised. We need to get real about what the issues are and how they must be tackled, and a scheme that targets those who drive the market with fiscal incentives will provide an easy win for ministers.

“The scope of ECAs must be expanded. In many cases, improvements to the building's fabric – such as insulation or glazing - will hold the key to improving energy efficiency, particularly in minimising waste heat.

Without incentives, many of the kinds of improvements necessary would take too long to offset against the savings they would create, which would be felt mainly by tenants.”

At a recent UK Green Building Council 'Dragon's Den' event, the BPF joined forces with organisations such as Friends Of The Earth and the Empty Homes Agency to plead their case for one type of incentive scheme to help green the country's building stock.

Bank of Scotland, BM Solutions and The Mortgage Business, all part of the HBOS group, fell into line with a number of other lenders by announcing they would curtail lending on new build flats.

All groups reduced the maximum loan-to-value they woulf offer on new-build rental flats and apartments from 85 per cent to 75 per cent. They also removed most of their best fixed and tracker mortgage deals.

Other groups that have stopped lending in this area include Nationwide and Chelsea Building Society, while Abbey temporarily withdrew from the market via intermediaries. A number of lenders cut their maximum loan-to-values to 50 per cent on new build flats.

David Hollingworth fro London and Country Mortgages said, "Everyone has been showing a much reduced appetite in this area due to issues around the transparency of builders' incentives, the real value of the properties and major fraud.”

Mortgage brokers said it had become extremely difficult for property investors to enter the buy to let market unless they were willing to part with a deposit of at least 25 per cent.

Price comparison website Moneysupermarket.com released figures yesterday that showed the number of buy to let loans fell from 4,025 to 674 in just one year, with nearly 600 of these being removed since the end of March.

The buy to let market undoubtedly slowed since the credit crunch with lenders asking for deposits of at least 25 per cent. Mortgage brokers said it was now getting very difficult for property investors to enter the buy to let market.

Rising demand for rental property has pushed many potential homebuyers out of the market, and driven average monthly rents up to £1,003.

According to buy to let lender Paragon, the average cost of renting a home has risen by 4 per cent since January 1, 2008 and by 12 per cent over the past six months.

It reported that one third of landlords believed tenant demand had risen rapidly in March, with 58 per cent stating that rental demand was both strong and stable.

The shift from new investors chasing capital growth to a more traditional view of buy to let as being based on rental income has raised doubts.

However critics have questioned whether this shift can sustain the strength the market has shown in recent years.

Rent increases and higher demand are appealing prospects to the majority of landlords, but Paragon's research highlighted the growing divide in the market.

Long-term buy to let owners found themselves in a good position, especially those who have seen rapid increases in house prices during their ownership and have relatively small mortgages. However, recent players in the buy to let market are at greater risk due to the current conditions.

This is reflected in Paragon's figures, which showed just 16 per cent of buy to let business came from people making their first landlord purchase, compared to 40 per cent in May, 2001.

The mortgage crunch, which effectively stopped Paragon itself from lending on new business, saw buy to let rates rise, lenders cut loan-to-value offers and arrangement fees on the best loans run into thousands.

Nigel Terrington, chief executive of Paragon, said, “There is still demand from new landlords to enter the market and opportunities remain for those investors, but professional landlords hold the majority of stock in the private rented sector and these larger scale investors account for the bulk of new transactions.

“Their landlords represent the core of the buy-to-let market – they are investors that base their purchase decisions on proven tenant demand for long-term returns rather than speculative investment for a quick profit.'

The average buy to let property is now worth £191,276 according to Paragon, which is an increase of 11.3 per cent compared to last year.

The association, which represents private residential landlords, said there were few similarities between the two housing markets and that the focus should stay on developing the UK market to reflect its own needs.

David Salusbury, chairman of the NLA, said, “We should be wary of calls to mirror the US housing market here in the UK, especially since there are few similarities and the US housing market is suffering considerably. We need to focus on developing the UK rental market around its own specific needs and circumstances.

“Encouraging a diverse UK rental market, including encouraging professional private landlords, will enable choice that will benefit consumers. Where is the evidence that large corporate investors are concerned about developing housing for the more vulnerable groups in society? Or will the focus only be on the high-profit areas of the market, as their shareholders might expect?”

Its opinion sparked a response from the British Property Federation (BPF), which campaigns on behalf of institutional investors.

Ian Fletcher, director for residential policy at the BPF, said, “The BPF supports professional landlords whether they are small, medium and large and indeed has all in its membership. Whether a consumer chooses a small, medium or large landlord should ultimately be their decision and not dictated by the NLA or any other person or organisation.

”Continuing to promote professionalism in the sector at all levels and its expansion should ultimately be good for the whole sector. The BPF will therefore continue to promote an agenda, which logically supports choice, meeting housing need, affordability and expanding opportunities. The NLA on the other hand, seems to want to promote protectionism, which will lead to fewer choices, greater housing need and higher rents.”

The firm specialized in weekend seminars that provided tips on property buying in the UK and abroad. Its aggressive buy to let investment strategy made it the embodiment of property speculation during the housing boom.

But an over-supply of flats in UK town centres led to falling resale values and rents not meeting expectations, which eventually led to lenders withdrawing mortgage financing from new-build apartments in 2005.

A spokesperson for the company said it was placed into adminstration because of “sustained difficulties arising from the credit crunch”.

Back in 2005, Inside Track made profits of £12 million, followed by £10.8 million in 2006 and finally £6.9 million last year.

Attendance figures for its courses had fallen dramatically and its last seminar attracted less then 12 people. As a result, it was announced that all seminars would be suspended.

Glyn Mummery, joint administrator for the company said, “Joe Public has lost confidence in the property market and there has been a huge drop-off in people going to the seminars”.

Despite making cutbacks and downsizing staff, administrator Vantis was called in.

Tony McKay, the firm's managing director said, “The action with respect to Inside Track seminars is regrettable but necessary,

“The company has seen a fall in the number of people who want to invest in the property market for the first time and that is understandable in the current climate.”

David Salusbury, chairman of the National Landlords Association, said, "Inside Track promised to make the UK a country of property millionaires.

"However, there is a real danger in encouraging such massive speculative investment in residential accommodation.

"Investors in residential property should be focused on the provision of affordable and decent homes over a much longer period of time and not just capital growth."

The firm specialized in weekend seminars that provided tips on property buying in the UK and abroad. Its aggressive buy to let investment strategy made it the embodiment of property speculation during the housing boom.

But an over-supply of flats in UK town centres led to falling resale values and rents not meeting expectations, which eventually led to lenders withdrawing mortgage financing from new-build apartments in 2005.

A spokesperson for the company said it was placed into adminstration because of “sustained difficulties arising from the credit crunch”.

Back in 2005, Inside Track made profits of £12 million, followed by £10.8 million in 2006 and finally £6.9 million last year.

Attendance figures for its courses had fallen dramatically and its last seminar attracted less then 12 people. As a result, it was announced that all seminars would be suspended.

Glyn Mummery, joint administrator for the company said, “Joe Public has lost confidence in the property market and there has been a huge drop-off in people going to the seminars”.

Despite making cutbacks and downsizing staff, administrator Vantis was called in.

Tony McKay, the firm's managing director said, “The action with respect to Inside Track seminars is regrettable but necessary,

“The company has seen a fall in the number of people who want to invest in the property market for the first time and that is understandable in the current climate.”

David Salusbury, chairman of the National Landlords Association, said, "Inside Track promised to make the UK a country of property millionaires.

"However, there is a real danger in encouraging such massive speculative investment in residential accommodation.

"Investors in residential property should be focused on the provision of affordable and decent homes over a much longer period of time and not just capital growth."

The news came as HBOS, Britain’s biggest group of lenders, announced its third increase in residential mortgage prices in as many weeks.

Britain’s fourth biggest lender, Cheltenham & Gloucester, raised many of its rates for the second time in three weeks.

Abbey also announced this week it would withdraw the majority of its buy to let mortgages, retaining only an expensive fixed-rate deal of 6.99 per cent for direct customers.

Chris Wood, of the National Association of Estate Agents, said, “It’s the amateur investors who are feeling the pinch. With lenders worried about falling house prices, prospective borrowers without a substantial deposit will find it very tough to get a buy to let loan.”

Last April there were 2,990 buy to let mortgage products on the market, with an average rate of 5.23 per cent. Today there are just 597, with an average rate of 6.75 per cent. Some specialist lenders, including Mortgage Trust and Paragon, stopped offering buy to let deals entirely.

Last year, lenders would happily loan up to 90 per cent of a buy to let property’s value, but now most landlords must raise a deposit of 25 per cent to obtain a mortgage.

Katie Tucker, of broker John Charcol, said, “After another week of turmoil in mortgage markets, novice landlords now face huge difficulties securing a loan, and thousands of existing landlords coming to the end of fixed-rate deals will find it very hard and very expensive to switch mortgage providers if they have not built up at least 75 per cent equity in their buy-to-let property.”

It was always known that areas close to universities were ideal for student letting and those in the city centre or with good public transport links were popular with professionals – but what about the property itself?

As the economic growth of provincial cities is reflected in the increased popularity of inner city living, apartment building has undergone somewhat of a boom.

It attracted a large number of professionals to rent in Manchester, Leeds, Liverpool and Birmingham and other places where many workplaces were just a short walk from the city centre.

However, this often led to oversupply in many cases, particularly in Birmingham. Therefore, it might be time to consider other types of investment property, such as detached houses.

According to a report by Nationwide, detached houses lost less of their affordability than the average home during the past five years, increasing in price by 41 per cent rather than the average 50 per cent.

Land Registry figures from the year to February 2008 indicated much the same story, with a figure of 4.4 per cent compared with an overall average annual rise of 5.3 per cent.

But differing opinions mean the concept of “home” and “house” takes on new meaning from person to person. Those who choose to let a property need to cater for the lifestyle of their tenants.

Leaders, one of the UK’s largest independently owned letting specialists, said national averages and trends didn't necessarily reflect the state of the property market in specific areas.

Latest reports show the current market, including buy to let, is at an all-time low, with property prices falling dramatically and landlords selling up in droves.

But Paul Weller, managing director of Leaders said this was not necessarily true of the entire nation.

“For example, the latest quarterly report from ARLA shows letting agents reporting, on average, a slight fall in rents in the South East. Yet we have seen an average rent rise of 1.5 per cent over the three months to March 2008 across the towns and cities we cover.

“Within this increase there have been a number of particular hotspots where rents have risen by up to 2.5 per cent, including areas in Surrey, Sussex and Hampshire.”

He said at any given time, rents on some property types could be falling due to oversupply, while others could be in greater demand and show significant rent increases.

“These details are never reflected in average figures, which is why you need to speak to a local specialist who knows your market inside out – what is most in demand in which areas; how best to present it; and what its realistic rental value is.”

He said that without expert, independent guidance many landlords and investors were at risk of misjudging the market or missing an opportunity.

He also said it was invaluable to choose a letting specialist with offices in a number of areas, because they could give insight into regional variations and hotspots that agents specialising in just one area could not.

The Association of Residential Letting Agents (ARLA) said that with the demand for housing set to soar in the private rented sector, it was concerned that agents and landlords could be tempted to cut corners.

During the last credit crunch, an upsurge in the number of “rogue agents” and “cowboy landlords” led ARLA to introduce bonding to protect deposits and rents, and insist on qualified staff in all the offices of regulated members.

Ian Potter, head of operations at ARLA said nowadays, the duty of care that landlords and letting agents owed to tenants, compliance with new legislation and operating to a code of best practice was regarded as being in everyone’s best interests.

“We are still worried that some landlords may try to cut corners and not comply with legislation covering safety and the protection of tenancy deposits.

“We are also worried that there could be an upsurge in lettings agencies opening for business, without being members of the professional bodies, having the right qualifications and providing clients money protection.”

Mr Potter said, “The lettings industry is better able than it was nearly two decades ago to cope with rogues and cowboys. This is due to the activities of the professional bodies leading to increased expectations from the consumer. These are complimented by the legislative framework now in place.

"But, it still remains ARLA’s stated aim that every letting agent must be licensed and landlords should become members of accreditation schemes.”

To avoid problems, ARLA suggested drawing up proper tenancy agreements, taking inventories and getting mandatory Tenancy Deposit Protection.

Figures from 1997 showed that 37 per cent of mortgages went to first time homebuyers but in January this year, this had dropped to just 13 per cent.

Spiraling house prices and the credit crunch have been cited as the major causes, which led to increased loan costs and many 100 per cent mortgages being taken off the market.

Ed Stansfield, property analyst from Capital Economics consultancy, said, “The withdrawal of mortgages based on five times salary or more, or 100 per cent of the purchase price, will reduce demand further.”

Research from information systems company CACI found that the average first-time homebuyer would need a £50,000 deposit to take advantage of the best mortgage rates.

Its also revealed that the average first-time homebuyer mortgage in London was £200,000, which would require a salary of about £60,000 plus a 10 per cent deposit.

However tightening credit conditions meant buyers looking for the best rates would soon need a deposit of at least 25 per cent.

Philip Machin, of CACI, said, “It is clear that the current economic climate is having a serious effect.'

The news came as Chancellor Alistair Darling prepared to meet major mortgage lenders, insisting they pass on recent interest rate cuts to customers.

He will reportedly ask them to allow struggling homeowners to take payment 'holidays' rather than simply beginning repossession proceedings.

Howard Archer of Global Insight said, “This fall indicates just how difficult it is for first time buyers in London. They are being priced out and pressure from lenders is still mounting.”