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BTL deals available to limited companies double in a year

It is a currently a challenging time for buy-to-let landlords, following a raft of changes introduced by the government which are threatening to cripple the private rented sector.

The phasing out of mortgage tax relief from April 2017, coupled with the introduction last year of the 3% stamp duty surcharge on additional properties, will inevitably see many landlords paying significantly more money in tax moving forward, leaving them with little alternative but to alter how they conduct their commercial and business affairs. 

To help avoid the hit, many investors are now looking to treat their mortgage interest as a business expense by setting up company structures to manage their rental properties, as reflected by a sharp increase in mortgage lending to buy-to-let landlords borrowing via limited companies, and this trend looks set to continue thanks to a sharp rise in the number of mortgage products aimed at limited companies.

The proportion of buy-to-let deals available to limited companies has doubled over the past 12 months, new research by Moneyfacts shows.

Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “It feels like the BTL market has been hit from all angles recently, and this has left landlords feeling vulnerable and wondering whether it is still worth continuing in the BTL sector. This has resulted in a shift in focus to limited companies, away from individual ownership, which is influencing not just landlords but also providers offering BTL mortgages.

“As the reality of April’s tax changes starts to bite, the proportion of deals available to limited companies has grown dramatically, having increased by 7% in just six months. With the extra pressure in the BTL market and the added interest in limited companies, it is no surprise that lenders have leapt into action and started offering more deals to limited companies.

“Despite the boost in product numbers, 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 BTL market. For example, the average two-year fixed rate BTL mortgage for those applying as a limited company stands at 4.22% today, whereas the average two-year fixed rate for the rest of the market is significantly less at 2.97%.

“With all the extra legwork a limited company option entails, any borrowers considering it should consult a financial adviser to ensure it is the right route for them.”

5 years ago

A year ago

6 months ago

Today

Number of Limited Company Products

30

133

201

313

Overall Percentage of the BTL Market

5%

10%

13%

20%

Source: moneyfacts.co.uk

 

Compiled: 22.5.17

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