The Office of Fair Trading is to investigate the sale-and-rent-back sector following concerns consumers are not properly protected, it has been announced.

Sale-and-rent-back companies buy the homes of people who are in danger of having them repossessed and then rent them back to them.

But the rapidly growing sector has faced claims that some companies pay less than 60% of the market value for properties, while others levy steep rent increases and some evicted people after just 12 months.

Citizens Advice has branded the schemes a "disaster waiting to happen" and has called for the sector to be regulated to help protect vulnerable consumers.

The Council of Mortgage Lenders has also expressed concern about the companies.

The Office of Fair Trading (OFT) said the current economic climate could lead increasing numbers of consumers to take up sale-and-rent-back arrangements, and that its study was "timely".

The study will focus on consumer protection and will be completed in September.

OFT chief executive John Fingleton said: "Sale-and-rent-back schemes might be helpful for some consumers but there are a number of potential concerns including whether consumers in difficult circumstances are making well-informed choices.

"We are therefore prioritising this work to take a good look at whether consumers are adequately informed and protected."

Andrew Probert, policy consultant at the National Consumer Council, said: "Anecdotal evidence suggests that many consumers are already suffering under these unregulated schemes.

"There is concern that these products are being confused with highly regulated equity release schemes. The OFT's investigation is therefore welcome and we call for a speedy conclusion.

"Consumers who sign up will be selling their homes at a large discount. They are then at significant risk of being forced to leave after renting for just a short period."

Adam Sampson, chief executive of homelessness charity Shelter, said: "These companies encourage hard-up homeowners to sign up for what is plainly a very bad deal. Shelter has seen cases where homeowners have not only lost out financially after selling their homes to a sale and leaseback company, but also lack any right to permanently stay in their home and ultimately find themselves homeless."

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