Market forces will ensure that it will no be an issue for buy-to-let investors to find lenders who do not overcharge for limited company BTL mortgages, Foundation Home Loans commercial director Simon Bayley has said.
He argued that at a time when landlords were under pressure, because of tax and stamp duty changes, it was not right to expect clients to stump up extra because of the “novelty and lack of choice”.
Certain lenders are charging up to 100 basis points extra for this product over their core range, according to Mr Bayley, when the risk is no different - effectively asking landlords to pay any tax saving from using a limited liability company structure to the lender instead.
He said the intermediary community was far too canny to go on selecting lenders who decide on this kind of pricing model.
“As soon as they realise that there are lenders who are not in the market to take short term advantage of landlords keen to minimise their tax exposure, then I am sure that market forces will dictate that this kind of overpricing will quickly disappear.”
In the Autumn Statement, chancellor George Osborne announced a 3 per cent premium on stamp duty for BTL investors and those buying second homes, aimed at raising £1bn by 2021.
Research from Kent Reliance last month revealed that changes to the treatment of landlords announced in last year’s summer Budget triggered a surge in borrowing through companies.
The firm said that since July, this trend had accelerated, as BTL investors absorbed the impact of the tax changes, with applications tripling year-on-year in September; up 213 per cent.
One quarter of all BTL mortgage finance demand is now through limited companies, up from 13 per cent a year ago, according to Kent Reliance.
David Whittaker, managing director of Mortgages for Business, commented that BTL investors can‘outfox’ the Treasury by getting a mortgage as a limited company rather than as an individual.
This comes as Hargreaves Lansdown boss Ian Gorham said it was time to forget BTL investment as it was expensive and did not compare favourably with investing in funds.
