Rise in ltd companies marks change in landlord trends

Lending to buy-to-let landlords looking to borrow via limited companies was up markedly in the first six months of the year, according to a new report.

The results of the H1 2016 Limited Company Buy-to-Let Index also suggests that the number of products available to limited company borrowers also went up.

Stamp Duty impact

Data from the report shows that the number of buy-to-let mortgage applications completed by limited companies rose to 30% of the total number of buy-to-let completions in H1 2016. This was an increase from the 21% seen in the final half of 2015.

Many landlords moved to incorporate their business, to avoid paying the additional 3% stamp duty surcharge on their investment. In response, the number of lenders offering specific products to limited company borrowers stood at 14, up from 12 last year.

In total, lenders offering limited company products now stands at 42% of the total sector, up from 30% in the first half of 2015.

Stabilised

Mr David Whittaker, managing director of Mortgages for Business, noted, ‘both applications and completions for limited company borrowers appear to have stabilised at around one third of all buy to let business. However this masks a dramatic change in the investment pattern for new purchases where the proportion investing through limited companies has risen from less than 20% by number (25% by value) in the first half of 2015 to over 50% in 2016, with second quarter applications by limited companies running at over 60% of total applications related to purchases of buy-to-let properties. This increasing proportion will also drive an increase in the proportion of completions in the next quarter.’[1]

‘There has only been a slight uplift in the proportion of remortgaging activity that relates to limited company borrowers, due to historical investment patterns. It would, however, appear that some landlords who already own property personally are sitting on their hands somewhat and holding back from remortgaging, probably waiting to see how the economy pans out post-referendum. With the Chancellor announcing his intentions to lower corporation tax to 15% following the Brexit result, we may even witness more landlords financing buy to let property via corporate vehicles. Clearly, the trend for limited company buy to let represents a real step change in behaviour as landlords adapt their investment strategies to mitigate the increased costs brought about by recent changes in the tax regime,’ Whittaker continued.[1]

Rise in ltd companies marks change in landlord trends

Rises

During March of this year, the number of completed limited company buy-to-let applications increased by more than three times, due to investors rushing to beat the Stamp Duty deadline.

Whittaker concluded by saying, ‘Last year I had thought that limited company pricing might come down a bit as some lenders, including our own lending brand Keystone Property Finance, chose to absorb the increased costs and offer the same rates to landlords borrowing both personally and via the limited company route. The fact that this has not happened may encourage more lenders to enter the space.’[1]

[1] http://www.propertyreporter.co.uk/landlords/growth-of-limited-company-btl-marks-change-in-landlord-behaviour.html