63% increase in use of Limited Companies when investing in BTL properties

New data from Mortgages for Business has revealed that a staggering 63% of applications by landlords purchasing buy to let properties are now being made using a Limited Company structure.

This figure is up from just 21% before the changes to tax relief on mortgage interest were announced by George Osborne in July 2015. This represents a substantial change in landlord behaviour and includes both new purchases and “transfers”, i.e. purchases made by landlords selling their personally owned property to their limited company. In contrast, the number of re-mortgage applications made via a limited company has remained at a similar level and aren’t expected to rise significantly until those who have recently used a corporate vehicle to purchase property are free from early repayment charges.

In terms of market share, buy to let mortgage products available to limited companies now accounts for 16% of all products, up from 13% in the first half of the year – reflecting the ever-evolving way in which buy-to-let property is now purchased and held. By number however, availability has remained stable at 195 (average) because the overall number of BTL products on the market dipped slightly. The index also reveals the average rate of a buy to let mortgage fell to 3.3% at the end of September, down from 3.7% in June. Of the products available to limited companies, rates fell to an average of 4.3%. This means that rates available to limited companies are only around one percentage point higher than the average market value, encouraging figures for those considering this form of borrowing.

Many lenders with products for both personal borrowers and limited companies, offer the same rates to both. At the moment, some of these lenders accept only SPV limited companies, including Foundation Home Loans and Paragon. Some of the more specialist lenders, primarily Aldermore Bank, InterBay Commercial, Shawbrook and Keystone Property Finance, also offer the same rates to trading limited companies.

(Data for the index is obtained from Mortgage Flow, MFB’s bespoke BTL product sourcing software and from its own transactional records.)

If you are thinking of getting into the buy to let property rental market as a new investor and don't know where to start, or you would like some impartial advice and guidance to get the best return on your investment, call me now on 01908 373580 or pop along and speak to me in person at our new offices in Central Bletchley, Milton Keynes.

danielle@inspiredagents.co.uk