Buy-to-let landlords are finally in retreat in the housing market, leaving young adults in a better position to buy a property, according to the latest data from mortgage lenders.

The Council of Mortgage Lenders said lending in March was £21.4bn, down 19% on the year before, almost entirely due to landlords withdrawing from the market. A double whammy of tighter Bank of England lending rules, which have forced banks and building societies to insist on greater rental cover and higher deposits, plus new taxes on rental income, has made buy-to-let far less financially attractive.

Lending peaked in March 2016, as landlords rushed through purchases to avoid a 3% hike in stamp duty. But since then, lending has gone into freefall.

The CML says that if the March trend continues “we can expect to have seen around 70,000 buy-to-let house purchases in the last year. This compares with 142,000 in the 12 months leading up to the stamp duty change. That’s 42% lower year-on-year”.

Nationwide’s buy-to-let subsidiary, TMW, said in February its third quarter 2016-17 lending to landlords had fallen to £0.9bn from £2.2bn in the same period and that “buy-to-let market activity has slowed considerably.”

Estate agents report that the withdrawal of landlord buyers has left the market freer for first-time buyers without pushing up prices. Mark Dyason, director of the UK-wide mortgage broker Edinburgh Mortgage Advice, says: “We are seeing a huge amount of pent-up demand ... for so long landlords have held all the cards, but with the various tax changes applied to buy-to-let, first-time buyers are firmly in the driving seat and are putting the pedal to the floor.”

The CML says that on a 12-month rolling basis to March 2017, there were 342,000 first-time buyers, the highest in nine years.

At campaign group Generation Rent, spokesman Dan Wilson Craw says the figures are a glimmer of hope for renters. “The number of first-time buyers increased by 27,000 in the year to February, compared with the previous year, so the reduced appetite for new property among landlords is clearly helping renters buy a home of their own.

“If house prices level off as a result of the new taxes on speculation, this should enable even more renters to afford to buy.”

But John Goodall, chief executive of buy-to-let specialist Landbay, warns that rents are likely to rise if lending to landlords is cut off. “Most forecasters expect continued high demand for rental properties. Someone is going to have to provide the housing. The government is not in a position to do it, so it needs private-sector money. It’s not a good situation for renters.”

Lenders now reckon that 2015 will go down as the peak year for buy-to-let, with no sign of mortgage approvals returning to former levels for years.

Bernard Clarke of the CML, in an analysis of the future of buy to let, says: “In a relatively short period, we have seen the introduction of a raft of fiscal and regulatory measures that bear down on landlords and buy-to-let lending. The combined effects have resulted in a significant reduction in new property purchases by landlords. Some of the measures have also encouraged landlords to sell existing rental properties.

“It is too early to predict long-term effects of these measures on the balance of tenure. But we may be beginning to see the reversal of a long period of expansion of the private rented sector.”

Over the past two decades, the number of privately rented homes has more than doubled from just over two million to more than 5.3 million, or from 9% to 19% of households.

Clarke adds: “Some are concerned about the expansion of buy-to-let, arguing that it reflects increasing affordability pressures for owner-occupiers.

“But it is also true that the growth of buy-to-let has widened choice for tenants in the private rented sector and delivered higher standards of accommodation.”

Many buy-to-let landlords are scrambling to avoid the impact of tax changes by restructuring their portfolios to escape higher taxes on their rental income. Some have set up limited companies, while others have increased rents or transferred properties to family members.