The number of limited company fixed rate mortgages for buy-to-let landlords has hit an all-time high, according to the latest figures from moneyfacts.co.uk.
Last year, mortgage interest tax relief for individual buy-to-let landlords began to be phased out, a gradual reduction that will be completely implemented in 2020. This helpful guide provides more information for investors that may be affected: https://landlordnews.co.uk/government-guide-tax-relief-changes-residential-landlords/
Since the changes were first brought in back in April 2017, landlords have started assessing their options – becoming a limited company is one of them. Limited company landlords are exempt from the reduction to mortgage interest tax relief, meaning that some investors will avoid higher costs by swapping their property portfolio over to this structure.
With more demand for this type of mortgage, moneyfacts.co.uk has found that providers have stepped up to the mark and are now offering more fixed rate products to limited companies than ever before.
In April 2013, just 17 limited company fixed rate mortgages were available, which rose to 80 in 2016. However, since the tax changes were first brought in last year, the number available soared to 212. This year, 235 are on offer to this type of borrower.
Charlotte Nelson, the Finance Expert at moneyfacts.co.uk, comments: “The figures from moneyfacts.co.uk show that the number of fixed rates available to limited companies has almost tripled in the space of just two years. Reaching 235 in April, this is the highest number on moneyfacts.co.uk’s records.
“The reality of last year’s tax changes hit landlords hard, as they were unable to claim tax relief. However, with things working slightly differently for limited companies, many landlords have started to shift their focus from individual ownership to this type of private company.”
She continues: “Providers who are still eager for buy-to-let business have put their best foot forward and are now offering more products than ever to meet this extra demand. Yet, despite there being more products on the market, under a quarter of the buy-to-let market offers this option.
“Borrowers considering this type of mortgage should be aware that they could find themselves on a more expensive deal compared to the rest of the buy-to-let market. For example, the average two-year fixed rate buy-to-let mortgage, for those applying as a limited company, stands at 4.29% today. Whereas the average two-year fixed rate for the rest of the market is significantly less at 3.01%.”
Nelson concludes: “With all the extra legwork that becoming a limited company entails, and how widely the costs can vary depending on circumstances, any borrowers considering it should consult a financial adviser and do the sums before committing to this option.”