The number of people investing in the buy-to-let sectors is expected to fall in the first quarter of the year ahead of changes to tax relief for residential landlords and the recent introduction of tougher mortgage lending conditions.

Buy-to-let lending improved during the fourth quarter of 2016, with the share of lending for acquisitions in the buy-to-let market increasing from 28% in Q3 to 38% in Q4, which was comparable with the 38% recorded in Q2 last year, according to the latest Mortgages for Business’ complex buy-to-let index.

“There was an obvious incentive for landlords to do business in the final quarter of 2016, which led to an increase in buy to let borrowing,” said Steve Olejnik, chief operating officer of Mortgages for Business.

But with mortgage tax relief set to be phased out from April of this year and now that the Bank of England’s Financial Policy Committee has been granted greater powers over the buy-to-let market, which will make it even harder for many buy-to-let landlords to get a mortgage due to new tougher mortgage affordability test, lenders expect to see activity levels in the sector slow, the Bank of England’s latest Credit Conditions Survey shows.

Charles Haresnape, group managing director, mortgages, at Aldermore, commented: “While availability of secured credit to households is expected to increase slightly over the next few months, this is likely to be moderated in the mortgages market by recent changes to affordability checks by lenders.

“The overall picture for 2016 showed that demand for buy-to-let borrowing rose significantly despite the tax changes introduced in April 2017 is unlikely to show significant increases in mortgage volumes, but we can expect to see a continued but slower upward trend over the next year.”