The European Central Bank (ECB) has said policymakers need to be aware that measures to limit mortgage lending can push up rent, and have a particularly negative impact on younger and less-well-off households.
The ECB has published a study that examined rules brought in by the Central Bank of Ireland in 2015, which put maximum loan-to-value (LTV) and loan-to-income (LTI) ratios on new mortgages. House buyers had to put down at least 20pc of the asking price, and could borrow no more than 3.5 times their income.
The study found that such borrowing limits increase rent by about 4pc within four years after the change. This is because the demand for rental accommodation goes up, which prompts more buy-to-let investors to enter the market and rent out properties. In order to entice them away from other investments, rents need to go up.