A resounding vote of confidence in the buy-to-let end of the housing market came yesterday from Bradford & Bingley, the specialist lender that accounts for some 20 per cent of all buy-to-let loans.
B&B deliberately held back its lending last autumn winter amid fears for the housing market generally and the side-effects of the new regulation of mortgage lending.
But this Spring it started lending more aggressively again, although its total lending in the first half of this year was still 40 per cent down on the record £4.1 billion in the same months last year.
"The housing market is achieving the soft landing that we predicted at the end of last year," said Steven Crawshaw, B&B's chief executive.
"Housing market fundamentals remain strong and we expect this situation to continue. Mortgage affordability should remain at historically good levels with positive impact from lower interest rates and employment remaining low."
Although housing market activity and mortgage volumes have been running well below the levels of last year, there has been a recovery in the second quarter of this year.
"Demand for rental property from both tenants and landlords is good. Surveys show high levels of confidence amongst landlords and a continued desire to invest in property for the long term.
"The prospects of stable house prices and rising rents are contributing to improving yield prospects."
Mr Crawshaw was commenting on half-year results showing B&B's underlying profits 7.6 per cent ahead at £150 million, not counting a £2.1 million loss on the sale of discontinued businesses.
He said directors remain "comfortable" with analysts' forecasts for underlying profits averaging £297.6 million for the full year.
The interim dividend is raised by five per cent to 6.0p. Similar treatment of the final pay-out would give the shares a yield of 5.6 per cent at last night's price of 3253/4p, down 12p on the day.
Looking ahead, Mr Crawshaw said: "The buy-to-let market has good growth potential it enjoys continuing support from strong social, economic and demographic drivers.
"Our fully secured lending book remains high quality and low risk."
B&B set aside £1.9 million for "impairment" in its loan book. At the end of June, one per cent of its residential loans were more than three months in arrears, up from 0.77 per cent a year earlier.
Buy-to-let arrears rose to
0.93 per cent from 0.52 per cent. B&B described these as "extremely low in a historical context" and pointed out that increases in arrears do not always always translate into higher repossessions and losses.
" High levels of equity underpin our loans and the average loan to value on new residential lending decreased to 71 per cent."
Mr Crawshaw said he was comfortable with the the present level of arrears. B&B it is unlikely to get materially worse and that last week's interest rate cut should have a positive impact.