Booming buy to let borrowing is a worry for Bank of England chief Mark Carney who is ready to step in and cool the market.
Lending statistics from banks and building societies show that money is pouring into buy to let as more landlords take out mortgages.
Carney and Chancellor George Osborne agreed in December that the state of the market was a cause for concern for the wider economy and that the Bank would be given new powers to restrict loans.
Responding to questions from MPs sitting on the Treasury Select Committee about buy to let lending, Carney said: “We think developments in the buy-to-let market have warranted heightened scrutiny and have done so for some time.
“As a general rule, any time you see a very sharp and sustained increase in activity in one area it at least bears heightened scrutiny.”
According to official statistics, buy to let has surged from 8.8% of new borrowing in 2014 to14.5% in 2015.
Carney has warned he is ready to take action, but tempered his threat by pointing out that he may wait to see the effect of impending tax changes for landlords.
From April, buy to let investors will have to pay a 3% stamp duty surcharge when buying any homes worth more than £40,000.
In April 2017, reduced tax relief on mortgage interest relief for higher and additional rate taxpayers will start to phase in.
Meanwhile, the Financial Conduct Authority (FCA) has warned borrowers about taking out self-certification mortgages after the web site of a new lender crashed under the weight of thousands of applications.
Prague-based selfcert.co.uk has now closed the site and claims to have a waiting list of 4,000 borrowers.
The FCA is warning borrowers are not protected under UK financial laws if they take out a loan with the lender.