More people are investing in property as an alternative to a pension as soaring house prices boost demand for rented accommodation, new research claims.

Rapid house price increases have spurred interest in the buy-to-let market, where the combination of capital growth and rental income has made it more attractive than some traditional investments, according to UCB Home Loans, Nationwide Building Society's specialist lending arm.

The group said the buy-to-let market had grown rapidly during the past four years, compared to several years ago when the rental property market was dominated by professional landlords.

At the end of last year there were an estimated 275,000 buy-to-let mortgages outstanding, worth about £24.2 billion and accounting for 3.5 per cent of residential mortgage lending.

Demand for rented accommodation has risen due to soaring house prices, an increase in the number of single people, and the fact that renting has become more acceptable, particularly among younger people.

Charles Reed, managing director of UCB Home Loans, said: "Increasing numbers of would-be first-time buyers are renting property while they save for the deposit. This is partly a result of the rapid rate of house price increases which we have seen in the past five years."