Forthcoming tax and regulatory changes are set to inflict "unintended and perhaps damaging consequences" on the buy-to-let boom.
A new report from the Council of Mortgage Lenders has warned that the regulatory and fiscal proposals are casting "considerable uncertainty" over buy-to-let and the private rented sector.
The report said that buy-to-let has made an important contribution to the expansion of the private rented sector over the last 15 years.
Lenders have advanced more than 1.7 million buy-to-let loans since the CML began monitoring the market in 1999. The private rented sector has doubled in size over the past 12 years following decades of steady decline.
Buy-to-let mortgage balances outstanding recently grew to more than £200 billion, equivalent to the gross domestic product of Hong Kong.
But now a series of reforms threaten its success.
These include Chancellor George Osborne's forthcoming tax crackdown, which will steadily phase out higher rate tax relief from 2017.
Treasury proposals to extend the tools available to the Financial Policy Committee (FPC) to address risks in the buy-to-let sector are another threat.
The mortgage credit directive, which comes into effect on 21 March next year, will see the Financial Conduct Authority supervised new consumer buy-to-let loans.
The CML said lenders may become more cautious about offering consumer buy-to-let mortgages.
“One consequence may therefore be that 'consumers' wanting to take out buy-to-let loans will have a narrower choice in the market, particularly in the short term.”
The CML urged the government and other authorities to consider the effects of uncertainty on the market. “In particular, the potential for a series of reforms to have cumulative, unintended and perhaps damaging consequences.”
It repeated its recent warning that the debate over the future of the housing market was becoming unnecessarily polarized and risked pitting home-ownership against buy-to-let.