New figures show more people are investing in the rental sector than ever before, with one in every 10 mortgages now buy-to-let.

There are currently 938,500 of the loans in operation, which are collectively worth £108bn, according to data published by the Council of Mortgage Lenders.

This is more than a 50-fold increase in terms of value since 1998, when there were just 29,000 of the loans in existence, worth £2bn.

And the rate of growth has been rapid over the last five years. Buy-to-let loans now account for 10% of all mortgage balances, compared with just 3% at the same point in 2002.

The CML said 171,800 new buy-to-let loans were taken out during the first six months of this year, a 13% jump on the same period of 2006, with the value of the loans rising by 22% to £21.2bn.

The group said that reports claiming buy-to-let landlords are pushing first-time buyers out of the market are misleading, and that the market is simply being fuelled by tenant demand.

It said people are choosing to rent for lifestyle reasons, such as deciding to study for longer and delaying having children.

The CML said the growth rate of the buy-to-let sector slowed slightly during the first six months of the year, with the number of loans taken out 3% lower than those in the second half of 2006, and only 2% higher in terms of value.

But it added that the sector still remains stronger than the wider mortgage market, where the value of lending fell by 4% during the same period.

As a result, buy-to-let mortgages accounted for 12% of all new loans taken out during the first half of the year, the highest proportion ever.

The CML said: "All the signs are that the buy-to-let sector will continue to expand.

"The UK has one of the lowest proportions of housing stock in the private rented sector of any industrial economy.

"The increasing numbers of students, the significant inflow of migrant workers and the growing demand for flexibility of tenure will all help the buy-to-let sector develop over the coming years."

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