The Bank of England is to crackdown on buy-to-let mortgages as it warns lenders that many landlords may default.

Banks and building societies are being told they will be watched more closely to ensure they are not issuing risky mortgages, the Daily Telegraph reports.

The move by the Bank of England comes as mortgage rates and costs have shot up since the Mini-Budget fiasco in September, and lenders being warned to be “ready for a prolonged period of credit stress”.

The operating environment for firms remains challenging.”

In a letter to bank chief executives, Bank of England official David Bailey said: “The operating environment for firms remains challenging.

“The impact of increasing interest rates, inflation and high cost of living, geo-political uncertainty, and supply chain disruptions is expected to pose challenges to firms’ credit portfolios.”

Up to an estimated £1 trillion is currently loaned to landlords and investors through buy-to-let mortgages.

Number doubles

The total number of companies set up by landlords to hold buy-to-let property doubled since 2017, and stands at over 300,000, research from Hamptons released in October revealed.

The increase was driven by new buy-to-let purchases being made in a company structure, as well as landlords moving properties from personal to company names.

Changes to Capital Gains Tax (CGT) announced in November’s Budget prompted warnings of a buy-to-let property fire sale as landlords rushed to remodel their portfolios or ditch them entirely.