Finance News

Number of Buy-to-Let Lenders Offering Limited Company Loans Soars by Almost 50%

Rose Jinks - October 25, 2018

The number of buy-to-let lenders offering limited company loans has soared by 47% over the past year, according to the latest Buy-to-Let Index from Mortgages for Business.

In the last quarter (Q3) alone, three new lenders have come into the market, with 22 now competing in the limited company loans space. In Q3 2017, there were only 15.

As a result of these new lenders, there are more buy-to-let mortgage products in the market. Overall, the index shows that, in Q3 2018, the total number of mortgage products available to landlords borrowing via a limited company averaged at 628. This figure has more than doubled year-on-year, from Q3 2017’s average of 263.

In the wider market, an average of 1,571 products were available between July and September, in contrast to Q2 this year, when the number of products averaged 1,547.

In terms of the proportions of the mortgage market, 44% of completed buy-to-let mortgage transactions were for limited company loans, which is up by 42% on Q2. Corporate structures (predominantly special purpose vehicles) can provide financial efficiencies, and have proved increasingly popular since the changes to tax relief on landlords’ finance costs were announced in the Summer Budget 2015.

The trend for remortgaging continued, with only one-third of buy-to-let mortgage transactions being made for purchases in Q3. The only property type seeing an increase in transactions was Houses in Multiple Occupation (HMOs), for which 36% of deals were for purchases – up from 33%. This comes despite new HMO licensing this October.

It is interesting to note that 96% of landlords borrowing via Mortgages for Business opted for a fixed rate buy-to-let mortgage in Q3, which is up from 93% in the previous quarter. 73% of those choosing to fix opted for five-year periods. If the preference for five-year fixed rate deals continues, it will have a knock-on effect in reducing the volume of buy-to-let borrowing, the firm points out.

Steve Olejnik, the Managing Director of Mortgages for Business, comments: “It has been encouraging to see so many new entrants to the specialist end of the buy-to-let market in the last quarter, putting product availability at an all-time high. This just goes to show there is still a lucrative, buoyant market out there following on from the recent regulatory changes.

“With the uncertainty surrounding Brexit and the possibility of another Bank rate rise in the near future, I am not surprised that the majority of landlords are choosing to fix. It will be interesting to see what knock-on effect this will have on the buy-to-let remortgage market.”