The Bank of England has announced plans to introduce more stringent checks on buy-to-let lenders amid concerns that the property investment market is moving into bubble territory.

The Bank’s Prudential Regulation Authority said it was putting in place a “guardrail” to prevent banks from making risky loans, warning that 20 per cent of lenders were not carrying out the necessary checks.

The main concern is that a bubble in the buy-to-let market could cause a wider housing market slowdown – bad news for millions of people who have invested in property. 1.7 million properties have buy-to-let mortgages, representing 17 per cent of loans used to acquire residential properties last year.

I’ve seen two boom-bust cycles in the UK property market and I’m not very keen to see a third one.

“You might form expectations about what the necessary long-term saving to support your retirement will be, which can then (if house prices fall) be transformed quite suddenly in ways that, frankly, are unwelcome,” said Andrew Bailey (left), head of the Prudential Regulation Authority, who told the press that the Bank of England has “nothing against” buy-to-let landlords, but believes that new restrictions on mortgages for buy-to-let investors will help reduce the risk of “very volatile boom and bust conditions.”

“I don’t think it benefits anybody, including people who own buy-to-let properties, to have an unsustainable boom-bust cycle in the UK property market. I’ve been in the Bank for 30 years and I’ve seen two of them happen and I’m very keen not to see a third one.”

Mortgage lenders will now have to take into account all the costs a landlord might have to pay when renting out a property as well as the borrower’s wider financial situation, including their personal tax liabilities and living costs.

Experts estimate that the Bank’s new lending criteria could reduce lending to landlords by up to 20 per cent over the next three years.