The revelation comes from an analysis by Countrywide Residential Lettings which says the new planned powers will enable the Bank to direct lenders over how much they can offer buy to let investors.
In effect, there will be new rules for lenders to 'stress test' how much new landlords can borrow and a requirement that their rental income needs to be larger than the mortgage interest repayments.
BTL landlords face putting down larger deposits
However, Countrywide says that the new rules would see around a third of new landlords having to put down bigger deposits, primarily affecting landlord investors in London and the south-east.
Nick Dunning, Countrywide's group commercial director, said: “Stress testing has the potential to increase entry barriers for would-be landlords and this will affect, primarily, areas in the south where yields are lower.
"Landlords will need to put down larger deposits for meeting stringent lending criteria which means that in parts of the south-east and London, many landlords will need to put down deposits upwards of 40%.
"Lenders will need to ensure that repayments are affordable and strike a balance between viability and affordability."
Mortgages for BTL investment property
Generally, lending on a BTL investment property is secured against the rental income it can generate and whether it will cover 125% of the interest component of the mortgage.
Lenders use this formula to bring security against interest rate rises and whether a landlord will reinvest money for improvements and general maintenance.
The analysis, which is contained in the Countrywide quarterly lettings index, also highlights that under the proposed stress testing rules, most new landlords would pass.
Rent to Buy scheme will bar BTL landlords
A recent announcement by the government to introduce a 'Rent to Buy' scheme which will see thousands of new homes being built across the UK has a sting in the tail for BTL landlords.
That's because the proposals contain a clause that no investors can use a buy to let mortgage to snap up a new home under the scheme.
The scheme has been hailed as offering a solution to the current housing shortage which will offer new homes with a 20% discount to tenants. The tenant will have first refusal to buy that property after five years.
Critics are also claiming that the scheme should be tightened further to prevent tenants who buy their home from then selling it to a landlord investor.
