More buy to let lending in UK going to limited companies
Landlords who have a limited company for their buy to let business are borrowing more than those who do not for the first time, new research shows.
Over half the value of buy to let lending in the second quarter of 2017 was provided to limited companies, according to the latest limited company buy to let index from Mortgages for Business.
Overall during the quarter limited companies borrowed more per quarter than individual landlords for the first time, including both purchase and remortgage transactions.
Of buy to let purchase completions some 73% by limited companies, up more than 10% from 62% in the first quarter of the year. Similarly, limited companies accounted for 76% of buy to let lending by volume, up from 63% in the previous quarter.
The index report suggests that this has been caused by high volumes of purchase applications from limited companies, making up 77% of buy to let purchase applications in the first quarter and 78% in the second quarter.
‘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 index 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. Among buy to let products available to limited companies, the average three and five year fixed rates fell 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 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.