Buy to let borrowing rose by almost a fifth last year, according to the latest lender data from the Council of Mortgage Lenders.
Landlord mortgages added up to 11.5% of total gross mortgage lending in 2012, rising from 9.8% in 2011.
Landlords borrowed £16.4 billion in total, the highest level for four years and 19% up on 2011.
Just under 137,000 buy-to-let loans were advanced in the year – split equally between remortgages and purchase loans.
At the end of 2012, landlords held 1,445,300 mortgages, accounting for 13% of all borrowing against homes.
Taking average deposits of 25%, buy to let landlords spent nearly £22 billion in 2012 – with around £11 billion on buying new properties to rent out.
About 1.14% of buy-to-let loans were in arrears of three months or more, compared with 2.03% of homeowner loans.
CML director general Paul Smee said: “Buy-to-let is benefiting from strong tenant demand, which is likely to continue. Loan performance compares favourably with the owner-occupier sector, and the overall outlook for the buy-to-let sector is positive.
“Landlords who can demonstrate a strong track record are in a good position to expand their portfolios. However, new potential landlords need to tread carefully before entering the buy-to-let market; considerations such as landlord licensing reinforce the need for potential landlords to gain a strong understanding of the legal and operating environment.
“Looking ahead, we will find out later in the year whether or not buy-to-let lending ends up within the scope of mortgage regulation as a result of the European Directive currently being finalised. If this does happen, policymakers must ensure that the very clear differences between buy-to-let and owner-occupier lending risks and operations are fully recognised in any regulatory framework that may emerge.”