The amount of mortgage interest that can be offset is being gradually restricted to reach the basic rate of tax by 2020.
The change will cut profits by around one fifth and have the biggest impact on recent buy-to-let (BTL) borrowers in the South East and London, the report by S&P found.
Some investors will not even realise they are running a loss until they do their tax returns this month, the report added.
It estimates that many borrowers who took out new mortgages over the past three years will not be able to refinance at their current debt levels. However it added that a “fire sale” by landlords was unlikely.
The tax changes will also make mortgaged landlords very sensitive to rising interest rates, according to S&P.
Most landlord loans to remain profitable
However, the phased introduction allows buy-to-let owners time to adjust strategies, the report added.
And the vast majority of landlords will remain profitable as a significant portion of mortgages were underwritten before 2008.
S&P credit analyst Alastair Bigley examined 160,000 securitised buy-to-let loans for the report.
He said: “The proportions of loss-making loans will increase as the tax system becomes less generous between now and 2021.
“We calculated that, if rents cannot be increased, 60.4% of the loans originated in the 2014, 2015, and 2016 vintages will become loss-making compared to the sample average of 4.0% by the time the tax changes become fully effective.
“We view a fire sale scenario, where large amounts of BTL property is placed for sale, which in turn could affect the wider housing market quickly and disproportionately, as unlikely.
“We believe the phased introduction of the full impact of changes in income tax treatments will give borrowers time to adjust their strategies to the new landscape.”