Rise in buy-to-let purchases by limited companies
There has been a sharp increase in activity from investors looking for buy-to-let finance using a limited company, according to Mortgages for Business. The number of buy-to-let lenders offering finance to limited companies has also risen as has the availability of products.
New applications for limited company mortgages accounted for just 15% of all buy-to-let applications in October 2015 but began to rise in the wake of the Chancellor’s announcement that buy-to-let purchases would face a 3% surcharge on Stamp Duty. By December, new limited company applications accounted for just over 38% of all buy-to-let applications – a huge increase.
David Whittaker, managing director of Mortgages for Business, said: “The increase in limited company buy-to-let activity is to be expected since the proposed restrictions to buy-to-let mortgage interest relief for individuals paying the higher tax rate were announced by the government in the Summer Budget.
“Operating portfolios via corporate structures is expected to be more tax efficient, particularly for higher tax rate-paying individuals, including individuals where the new tax regime will tip them into the higher tax bracket where previously they had remained below it.”
Lenders respond to demand
The proportion of lenders offering mortgage products to limited companies has risen alongside the demand, from 23% in the first half of 2015 to 36% by December.
The number of products for limited company applicants increased by nearly 50% to an average of 147 in the second half of the year – up from 99 in the first half of 2015.
Whittaker noted: “It’s interesting that pricing has come down, if only marginally. I wouldn’t be at all surprised if rates for limited companies reduced further in the coming months but I doubt we’ll see huge falls.”