Rising interest rates will plunge thousands of buy-to-let landlords into financial difficulties and could see a wave of properties repossessed, a legal advice service has warned.

The UK buy-to-let industry has boomed in recent years, becoming the fastest-growing part of the mortgage market.

But its heyday may be coming to an end: economic policymakers have raised concerns that it is a threat to financial stability, and the chancellor George Osborne announced a clampdown on tax breaks for buy-to-let landlords in last month’s Budget.

Bank of England governor Mark Carney has signalled that interest rates are likely to begin to rise at the end of this year, increasing mortgage costs for many.

The Bank of England base rate has been at a record low of 0.5 per cent since March 2009, keeping the cost of mortgages within reach of thousands that would otherwise have struggled.

But as rates start to rise, the Council of Mortgage Lenders forecasts there will be 16,500 repossessions next year.

Of these, about a third are likely to be buy-to-let properties, the Citizens Advice Bureau charity network estimates. It forecasts that nearly 5,000 households living in buy-to-let properties will be evicted from their homes with little notice this year.

In addition, between 500 and 2,000 households a year are evicted from unauthorised buy-to-let homes, the bureau said — properties that the mortgage lender thought were being occupied by the borrower, but had been rented out.

These figures are likely to grow in the coming years as the base rate rises, it warned.

Some tenants only find out that they are being evicted when bailiffs arrive, said Gillian Guy, the charity’s chief executive.

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“As interest rates rise, there is a risk that more tenants will face repossession and the prospect of homelessness.”

The problem is particularly acute in cases where the landlord does not have a buy-to-let mortgage or the lender has not consented to the property being rented out, Ms Guy added.

In these cases, tenants must take court action to receive two months’ grace before leaving their property.

But many tenants are not aware they have this right, and lenders sometimes do not inform them, the research by Citizens Advice found.

Ms Guy urged banks to visit a property due to be repossessed and check “face to face” who is living there, in order to inform them of their legal position.

Councils should ensure that their local landlord licensing scheme checks whether the property owner has a suitable type of mortgage, she added.

Bob Pannell, chief economist at the CML, said he expected the “overwhelming majority” of borrowers to be able to bear the additional cost of rising interest rates.

However, he said, “the underlying pace of growth in buy to let activity has been slowing” and this “downward trend” may be reinforced by recent policy changes.