A growing number of landlords are incorporating in order to salvage profits from the difficult buy to let sector, a bank says.
Richard Rowntree, managing director for mortgages at Paragon Bank, says: “Industry data highlights an increase in BTL mortgages written to landlords operating as limited companies over the past five years, as a growing number seek to minimise the impact of tax policy changes introduced by government in 2017.
“Larger loans are often available to incorporated landlords and lenders typically assess interest coverage at a lower rate for limited company applications.
This means that purchasing or remortgaging through a Special Purpose Vehicle (SPV) limited company structure can help to increase the chances of the deal working, something that takes on extra significance when affordability is tightened as we’re seeing across the market currently.”
According to research by Paragon Bank earlier this year more than six in 10 landlords planning to buy a new rental property advised that they would do so within a limited company structure.
This follows a five per cent increase compared to Q4 2022 and a year-on-year rise of 12 per cent to mark a return to the high reported in Paragon’s data for Q2 2022.
Landlords who intend to purchase as an individual have fallen by five per cent since Q4 2022 to 24 per cent.
Of those who plan to purchase within a limited company structure, 64 per cent have six or more properties.
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The only place I am flocking too is to the estate agents to sell up 💰💰🎉🎉
Bye then ✋
Sense will prevail in time. Section 24 will be undone as too many landlords will exit. Same thing happened in Ireland and in the next budget there are flagged incentives for landlords (in Ireland) but starmer and Rishi will have to get off the Xanax.
I do hope so, even though I will have departed the sector, I don’t want it to fail, as that just means more pain for tenants.
Interest rates for incorporated or limited companies are actually more expensive than the persomal buy to let loan interest rates. Paragon are no different. So I do not understand why this article has been written? Is it to raise their profile in BTL market or to be relevant? The reason for high rates, they say is to do with incorporarion having limited liability, but they take up personal guarantee. So it should not be different rates. Only very few lenders do the zame rates bor both vehicles.
I noticed that too. The MD for mortgages of a bank should know better - either that, or I want to know who his broker is!!
I agree. And also it's a shame they don't mention how hard it is to get the money out of the Ltd without paying a big chunk of tax.
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