Specialist lender Bradford & Bingley is to continue offering mortgages on new buy-to-let properties after one of its main rivals pulled out of the market.

The Portman Building Society's subsidiary The Mortgage Works became the first lender to refuse borrowers wishing to purchase newly built buy-to-let properties. It said it would only lend on properties more than a year old.

The company said that the oversupply of new homes meant that valuations had become "more of an art than a science". And it added that developers were offering buyers deals on the side which lenders did not always know about.

Typically mortgage lenders will only advance 85 per cent of a property's value for buy-to-let investments. But it is believed that some would-be landlords could be using discounts from builders towards this without mortgage companies realising it.

Bradford & Bingley, which has a 22 per cent slice of the buy-to-let sector, said it had no plans to stop lending on new buy-to-let properties.

"We have no plans to withdraw from this sector of the market," said a spokesman. "However, when lending on new-build flats we deduct the values of any incentives the developer is offering. For example, if the property has a 12 month rent guarantee we deduct this and underwrite on the lower value."

But Matthew Wyles, group de-velopment director of The Mortgage Works, said the group planned to stay away from new buy-to-let properties until the "market forces of supply and demand" had reached equilibrium.

"Owing to the current oversupply of newly built property, valuation in this sector is more of an art than a science," he said. "Some developers are now prepared to do deals on price outside of the formal contract.

"In these cases the lender may be unaware of the actual price being paid and ends up relying on a valuation which

may in turn be based on erroneous assumptions."

Portman said that following its decision it would honour all current applications in the pipeline.

The Council of Mortgage Lenders said it was not aware of any other lenders planning to stop offering loans on new properties.