In its report the BoE said that in the event of an economic downturn against a backdrop of rising interest rates landlords may struggle to make a profit from their investment and choose to sell up.

The sale of buy-to-let properties in a stagnant housing market could exaggerate drops in house prices.

An increase in customers defaulting on their mortgages because of tougher economic conditions could also lead to losses across lenders – damaging financial institutions’ capital position in the market.

The report said: “Buy-to-let borrowers are potentially more vulnerable to rising interest rates because loans are more likely to be interest only and extended on floating-rate terms, and affordability tends to be tested at lower stressed interest rates than owner-occupied lending.”

The FPC said it would continue to monitor the sector closely, with HM Treasury due to consult on tools for the FPC related to buy-to-let lending later in 2015. The committee plans to provide an in-depth evidence base on how buy-to-let could carry risks to the UK’s financial stability.