It said it is unclear on whether the main rationale for the proposed extension relates to market risk or consumer protection.

The CML believes that if the aim is to protect amateur property investors from poor property investment decisions, then regulating the mortgage process - as opposed to the sale process - will not necessarily address this.

It also said there is little evidence of consumer detriment to buy-to-let mortgage borrowers arising out of their mortgage borrowing, so the case for extending regulatory scope is not clear cut.

However, the CML does back plans for the expansion of regulation to cover second-charge lending and does understands the rationale for extending FSA regulatory scope to the acquirers of mortgage portfolios when they are sold on by originators.

Michael Coogan, director general of the CML, said the trade body will now study the Treasury consultation paper in detail, in parallel with the FSA’s consultation on potential changes arising from the Mortgage Market Review.

He added: “Next year is clearly going to be a year of regulatory change for mortgage lenders - but it is important that change should have a clear rationale and a clear set of outcomes, and not be implemented simply for its own sake as a reaction to past events that conduct of business regulation would not have prevented.”