For the first time, landlords who have a limited company established for their buy to let business are lending more than ‘classic’ individual investors who do not.
According to research from Mortgages for Business ‘Buy to let Index’, more than half (51%) of all lending in Q2 2017 was provided to limited companies. Nearly three quarters (73%) of buy to let purchases were with a limited company, up from three in five (61%) in Q1.
The index report suggests that the recent increase in lending has been caused by high volumes of purchase applications from limited companies, making up on average 77.5% of all buy to let applications in 2017.
‘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,’ said Steve Olejnik, chief operating officer of Mortgages for Business.
The Mortgages for Business measure also shows pricing improvements, particularly three and five-year fixed rates, as buy to let lenders seek to compete in the ever-increasing limited company space.
‘The changes to mortgage tax relief have only added to landlords’ growing tax burden and the buy to let sector has seen a definitive shift towards limited company lending, with 24% of investors considering incorporating or transferring property to spouses,’ said John Eastgate, sales and marketing director of OneSavings Bank.
‘Against a backdrop of political and economic uncertainty, investors’ confidence has also been knocked by weakening house price growth and new lending restrictions which will fundamentally alter the mix of landlords,’ he pointed out.
‘We are already seeing signs of amateur landlords leaving the market, paving the way for committed landlords, which will lead to greater stability and professionalisation of the sector he added.