New data from Mortgages for Business has revealed that 63% of applications by landlords purchasing buy to let properties are being made using a limited company structure.
This figure is up from just 21% before the changes to tax relief on mortgage interest were announced by George Osborne in July 2015. This represents a sea change in landlord behaviour and includes both new purchases and “transfers”, i.e. purchases made by landlords selling their personally owned property to their limited company.
In contrast, the number of remortgage applications made via a limited company has remained at a fairly similar level and aren’t expected to rise greatly until those who have recently used a corporate vehicle to purchase property are free from early repayment charges.
In terms of market share, buy to let mortgage products available to limited companies now accounts for 16% of all products, up from 13% in the first half of the year. By number however, availability has remained stable at 195 (average) because the overall number of BTL products on the market dipped slightly.
The index also reveals the average rate of a buy to let mortgage fell to 3.3% at the end of September, down from 3.7% in June. Of the products available to limited companies, rates fell to an average of 4.3%. This means that rates available to limited companies are only around one percentage point higher than the average market value.
Commenting on the result, Mr Whittaker said: “Many lenders with products for both personal borrowers and limited companies, offer the same rates to both. At the moment, some of these lenders accept only SPV limited companies, including Foundation Home Loans and Paragon. Some of the more specialist lenders, and I’m thinking primarily of Aldermore Bank, InterBay Commercial, Shawbrook and our own lending band Keystone Property Finance, also offer the same rates to trading limited companies.”
Data for the index is obtained from Mortgage Flow, MFB’s bespoke BTL product sourcing software and from its own transactional records.
The index focuses on buy to let lenders with commoditised products for Special Purpose Vehicles operating via intermediaries. Bespoke offerings have been excluded from the data.