Limited companies are borrowing more than individual landlords for the first time, according to Mortgages for Business.
Limited Companies Borrow more than Individual Landlords for First Time
The firm’s latest Limited Company Buy-to-Let Index found that over half the value of buy-to-let lending in the second quarter (Q2) of the year was provided to limited companies.
Based on lending transactions brokered by Mortgages for Business, data from Q2 shows that limited companies borrowed more per quarter than individual landlords for the first time, including both purchase and remortgage transactions.
Limited company structures are particularly common when making new purchases, and Q2 proved no exception. Of buy-to-let purchase completions in Q2, 73% were performed by limited companies – up by more than 10% from 62% in Q1.
Similarly, limited companies accounted for 76% of buy-to-let lending by volume, up from 63% in Q1. This was caused by high volumes of purchase applications from limited companies, accounting for 77% of buy-to-let purchase applications in Q1 and 78% in Q2.
Steve Olejnik, the COO of Mortgages for Business, comments on the findings: “Landlords are increasingly looking to limited company structures because of the benefits they bring in the form of tax efficiencies and softer affordability testing. The structures are not without their hurdles, however, and we recommend all our clients take professional tax advice before deciding how to proceed.”
The index also shows pricing improvements, particularly three and five-year fixed rate deals, as buy-to-let lenders seek to compete in the ever-increasing limited company sector.
Among buy-to-let products available to limited companies, the average three and five-year fixed rates dropped by 0.4% each, to 3.7% and 4.0% respectively. This further narrows the gap with the wider market, with the average three-year fixed rate across all buy-to-let products just 0.2% lower, at 3.5%.
The appeal of limited company structures has become stronger following the Government’s reduction in mortgage interest tax relief for individual buy-to-let landlords.
The Mortgages for Business figures arrive as the Residential Landlords Association (RLA) calls on the Government to scrap its recent tax changes.