So interest rates are set to rise. Some are predicting rates of six percent by the year end, and remember rates were at just 4.5 percent last July. So, if these gloomy predictions prove true, that would mean a highly significant jump in mortgage payments.

And yet buy-to-let investors still seem to be showing no sign of selling. According to Paragon Mortgages, 92 percent of respondents to its latest survey say demand from tenants is stable, growing or booming. Apparently it’s the second highest reading from the five-year-old Paragon index yet recorded. (Although we have a natural distrust of indices that put stable, growing and booming under one heading.)

But, if you don’t believe Paragon, then let’s see what Mintel has to say.

Mintel reckons the number of landlords operating in the buy-to-let market is set to double. According to Mintel’s Paul Davies: “The buy-to-let mortgage market has experienced meteoric growth since the late 1990s, outperforming the wider mortgage market over the past few years,” and he “expects the market to continue to grow at a healthy rate over the coming years, driven by the expected expansion in the population and the continuing strong demand for rented accommodation.”

In fact, Mintel says three percent of home owners are thinking of buying a property to let between now and 2010.

It’s heady stuff. Of course, as house prices soar, more and more property owners are finding they can raise the capital to buy another property and get the mortgage funded by the tenant. This, in turn, is creating an upwardly spiralling circle.

Do bear in mind the following, however.

First of all the buy-to-let market is only around ten years old. Sure, it’s grown fast, but then it’s quite easy to grow from zero. Of course this market is growing, it’s a long way from reaching maturity, and much of the expansion in buy-to-let has come as properties that were already available to rent were mortgaged for the first time.

Also remember upwardly spiralling booms always end. Tears are nearly always the result.

A market that is being propelled by its own inertia is a market that is not based on solid foundations, no matter how sound the bricks and mortar the properties are built with.
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