80% of BTL purchase applications made by limited companies

80% of BTL purchase applications made by limited companies

In Q3 2017, nearly four out of every five pounds lent for buy-to-let purchases via Mortgages for Business was borrowed by a limited company, according to the firm's latest data.

This represents 79% by value of completing buy-to-let purchases, up from 73% in Q2.

The index also showed that mortgage activity by landlords using limited companies remained high generally throughout the quarter. Limited company transactions (for purchases and remortgages) made up 48% of buy-to-let completions in Q3 by number of mortgages, and 47% by value of lending.


The increase in the use of limited companies by landlords for their borrowing needs is also reflected in the statistics held by Companies House which show that there was a spike in registrations for Special Purpose Vehicle limited companies (with property related SIC codes) in 2016 following the 2015 Summer Budget when the then Chancellor announced changes to income tax relief on finance costs for landlords borrowing personally.

Steve Olejnik, COO at Mortgages for Business, said: “There was, unsurprisingly, a spike in SPV registrations last year, but it looks like the numbers have been increasing for considerably longer than might be expected. Looking at historic registrations, numbers have been on the rise ever since 2008 which, I’m sure you can guess, was not a popular year to start a property company).

“That said, the 2015 Summer Budget has noticeably sped things up, with 2015 and 2016 showing the strongest growth in registrations in the sample, whether proportionally or in absolute terms.  Over 20,000 new SPVs were registered in the year so far compared to c.13,000 in 2014 – scaling up suggests a figure somewhere just shy of 35,000 by the end of the year, an increase of c35% over 2016.

“Landlords are turning to SPVs because of the benefits they bring in the form of tax efficiencies and softer affordability testing. Switching to corporate structures is not without risk, however, and we recommend all our clients take professional tax and finance advice before deciding how to proceed.”

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Latest Comments

Tony Gimple
Tony Gimple 09 Dec 2017

Linking professionalism to limited company borrowing is a flawed concept. Despite S24 etc., limited companies are the most tax inefficient way of running a property business and leave borrowers seriously...

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Evelyn Attwood
Evelyn Attwood 01 Dec 2017

It's normal. If you plan to buy a house in one of the most beautiful spots in the country you should pay a high price.

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Evelyn Attwood
Evelyn Attwood 01 Dec 2017

I think that the situation will be the same at December.

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Scott Garnet
Scott Garnet 06 Nov 2017

If you have a patio or a porch it is important to make sure that any connecting doors are secured. Good advice for sliding glass doors is replacing the panels with storm resistant glass and getting heavier...

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richardrawlings
richardrawlings 01 Nov 2017

What has not been mentioned here is the effect of not only higher interest payments, but also that these payments are less likely to be offsettable as a business cost due to the scaling back of mortgage...

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Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

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maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

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maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

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zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

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Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

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Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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