A boom in buy-to-let properties could trigger another credit crunch, according to the Bank of England.
The rapid growth in lending to landlords is a risk and could destabilise the housing market, according the Bank as reported by The Mirror.
Since 2008, the buy-to-let market has soared by more than 40%, compared with a 2% increase for those with loans for homes they live in.
The Bank of England says this surge risks pushing up property prices across the board, forcing buyers in general to take on every bigger debts.
Buy-to-let landlords could fuel any fall in prices if what they get in rent fails to cover their mortgage payments.
Evidence suggests that 40% of these investors would react to any shortfall by selling their property, with the knock-on effect being that renters would then face eviction.
The Bank has previously warned of these dangers but has highlighted another risk: its Financial Policy Committee - tasked with spotting the next banking crisis - flagged-up “potential developments in the underwriting standards.”
These include banks and building societies letting lending standards slip in a rush for business.
The Bank has asked the Treasury for new powers to deter risky lending. Without this, it said, the “sector could pose risks to broader financial stability, both through credit risk to banks and the amplification of movements in the housing market”.