Lenders reported that demand for secured lending for house purchase increased slightly in the final three months of 2016, partly driven by landlords, but the mortgage market is expected to be flat in the first quarter of this year.

The Bank of England’s latest Credit Conditions Survey, which assesses lender expectations, found that demand for buy-to-let lending and remortgaging increased significantly but little change was expected in the next three months, with lending to landlords forecast to decrease.

Commenting on the data, Steve Olejnik, chief operating officer of brokers Mortgages for Business, said: “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.

“Many investors will have wanted to beat the Prudential Regulation Authority’s tightening of buy-to-let affordability checks, which came into force this month, as well as the forthcoming changes to income tax relief on finance costs.

“Increased landlord confidence will have also been driven by greater familiarity with the changes to Stamp Duty earlier the year, and a more stable macro-economic outlook following post-referendum turbulence.

“For investors, the fourth quarter of 2016 was therefore a sensible time to do business, and we saw increased demand in both the residential and commercial property sectors. Buy-to-let pricing remained largely unchanged, which also encouraged activity, particularly from landlords using limited companies as borrowing vehicles.

“While the fiscal and regulatory changes will affect investor demand, the property market will continue to offer strong returns to those who take an intelligent and level-headed approach to their portfolios.

“Landlords need to factor the forthcoming tax changes into their financial planning, and should always consult with a professional tax adviser.”