The Treasury will consult on whether to impose loan to income and loan to value caps on buy-to-let mortgages next year.
In response to Bank of England requests to control the housing market today, the Treasury says it will gather evidence on the risks posed by buy-to-let lending.
The Bank of England’s financial policy committee, which manages financial stability, says buy-to-let poses a similar risk to owner occupier lending and must be tackled.
It calls for loan to value and loan to income caps on buy-to-let as well as owner occupier mortgages.
The UK dodged buy-to-let FCA regulation through the European mortgage directive after a Treasury campaign alongside senior Conservative MEPs.
Earlier this month Labour said it would hand councils the power to limit buy-to-let lending against new-build properties in a bid to boost first-time buyers.
The consultation states: “The FPC argued that buy-to-let mortgages can pose risks to financial stability through similar channels to the owner-occupied sector. The Government intends to consult separately on these recommendations in 2015 with a view to building an in-depth evidence base on how the operation of the UK buy-to-let housing market may carry risks to financial stability.”