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BTL mortgage sector continues to see a shift towards limited company lending

The number of rented homes owned through a company has been on the up for a while now, with new data from Mortgages for Business revealing that over half the value of buy-to-let lending in the second quarter went to limited companies for the first time ever, including both purchase and remortgage transactions.

The current phasing out of mortgage tax relief is encouraging more landlords to own their buy-to-let portfolios through a company rather than hold as a personal asset, which largely explains why limited companies accounted for 76% of buy-to-let lending by volume, up from 63% in the first quarter.

Steve Olejnik, COO of Mortgages for Business, said: “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.”

John Eastgate, sales and marketing director of OneSavings Bank, agrees that the changes to mortgage tax relief have only added to landlords’ growing tax burden.

He commented: “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.

“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.

“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.”

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