Although the rental sector is strong and demand predicted to increase, Standard and Poors have said that more than 30% of buy-to-let borrowers could find themselves in negative equity if house prices dropped by 5% this year and a further 5% next year.
The opinion of S&P is on an assumption that buy-to-let landlords have (typically) higher loan-to-value ratios on their mortgages.
S&P credit analyst Mark Boyce said: 'In the near term, the buoyant UK rental market should continue to support buy-to-let borrowers, but interest rate rises are a risk on the horizon.
'Furthermore, even relatively mild house price declines over the next two years could place more than 30% of buy-to-let borrowers in negative equity, reducing their financial flexibility and thus risking a rise in arrears.'