The Bank of England is cracking down on buy-to-let mortgages as it braces for a wave of defaults in the face of a UK recession.
It has warned banks that it intends to scrutinise risky areas more heavily, given rising interest rates and a surge in inflation.
Lending to landlords and small businesses is to face greater oversight, as well as borrowing on credit cards, reports the Telegraph.
Bank of England executive director David Bailey ordered lenders to be "ready for a prolonged period of credit stress".
In a letter to bank chief executives, he said: "The operating environment for firms remains challenging.
"The impact of increasing interest rates, inflation and high cost of living, geo-political uncertainty, and supply-chain disruptions is expected to pose challenges to firms' credit portfolios."
Boom
Buy-to-let mortgages have boomed in recent decades, with close to £1trillion currently borrowed by landlords.
However, recent increases in borrowing costs raise the risk that landlords will not be able to find tenants who can afford rents high enough to cover their mortgage payments.
Many thousands of buy-to-let investors are at risk of a default if they start to lose money.
The average buy-to-let two-year fixed-rate deal stood at 6% last month, up from 2.8% a year earlier - adding around £389 to typical monthly repayments.
Economists believe the UK entered a recession in the last three months of 2022, although this has not yet been confirmed by official data.
- Central banks risk undermining independence by wading into social issues and seeking to tackle climate change, the head of the US Federal Reserve has warned.
Jerome Powell said it was essential that institutions "resist the temptation" to get into social issues beyond their remit.
The Telegraph says his comments are likely to be seen as a rebuke to the Bank of England, which has been criticised by politicians for its approach to climate change. The bank has described managing financial risks from climate change a "key aspect" of delivering its "mission" to "promote the good of the people".
Mr Powell singled out climate change as an "inappropriate" topic for unelected central bankers to address.
He said: "We should stick to our knitting and not wander off to pursue perceived social benefits that are not tightly linked to our statutory goals.
"We (the Federal Reserve) are not and we will not be a climate policymaker.
"Taking on new goals, however worthy, without a clear statutory mandate would undermine the case for our independence."