MortgagesMar 15 2016

Lenders consider offering company buy-to-let deals

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Lenders consider offering company buy-to-let deals

Changes to buy-to-let taxation are leading some landlords down the limited company route, but only a handful of high street banks have revealed they are currently assessing whether to get involved in this market.

In the Autumn Statement, chancellor announced a 3 per cent premium on stamp duty for buy-to-let investors and those buying second homes, aimed at raising £1bn by 2021.

This followed George Osborne’s statement at the summer Budget that the government will restrict relief on mortgage interest payments for all landlords to the 20 per cent basic rate of income tax, phased in over four years, starting from April 2017.

However, brokers said the moves will just drive some landlords to transfer ownership to corporate structures, which continue to benefit from relief on mortgage interest payments.

A Shawbrook Bank poll of more than 300 brokers last month found 80 per cent expect the stamp duty changes to impair the housing market and the lending environment generally.

Pete Mugleston, director of Online Mortgage Advisor, said his firm had seen a significant increase in enquiries from people looking to purchase a buy-to-let property within a limited company.

Bob Young, chief executive officer of Fleet Mortgages, also suggested the use of limited companies or special purpose vehicles was increasing, particularly among professional portfolio landlords who identified some of the advantages of purchasing and holding property within such a structure.

He cited figures from Mortgages for Business, which showed that at the tail end of 2014 the number of limited company buy-to-let products was 79, a figure which was up to 99 by the end of the first half of 2015.

“I would suggest now that limited company products have moved past the 100 mark and are pushing upwards, but this is still a niche area and is likely to remain so, albeit with more lenders looking at the market,” stated Mr Young.

John Heron, managing director of Paragon Mortgages, said they have provided lending facilities for landlords that choose to hold their properties in a vehicle company for many years.

He pointed out while the taxation of rent received in a limited company structure is exempt from the changes to the taxation of rents for individuals announced in the Summer Budget, landlords need to consider carefully whether or not incorporation is a route that suits them.

Mr Heron said: “For this reason, we strongly recommend landlords seek specialist legal, financial and tax advice.

“In respect of the changes in stamp duty due to be introduced on 1 April, whilst there has been a consultation on whether there should be an exemption for corporate bodies holding 15 or more properties, it is not clear that such an exemption will be framed in the final legislation.”

A spokesman for Metro Bank stated it already does limited company buy-to-let through its commercial team, pointing out landlords still have to pay the higher stamp duty unless they complete before April.

“They can however reduce the tax by setting up a limited company once those summer Budget changes are phased in throughout 2017 to 2020,” a spokesman added.

Yorkshire Building Society Group also responded that they do some fairly small scale buy-to-let lending to limited companies through the Norwich & Peterborough Building Society commercial mortgages team.

As for the larger lenders, a HSBC spokesman stated there are a lot of moving parts in buy-to-let at the moment - stamp duty, tax relief changes and Financial Policy Committee potential intervention for greater powers - of which the industry is in consultation.

“So whilst we have no immediate plans to enter into limited company buy-to-let, we continue to closely monitor the developments in the market and the combined impacts of changes on landlords, tenants and lenders.”

A spokeswoman for the Lloyds Group also said they regularly review the mortgage range and make changes in line with the market and competitors.

However, currently there are no plans to launch any buy-to-let products aimed at limited companies.

“Due to the number of changes facing the buy-to-let market we will continue to monitor the impact of these on the market.”

Barclays, Nationwide, Natwest, TSB and Leeds Building Society all came back to say they do not offer limited company structures and have no current plans to do so.

Virgin Money also does not lend to limited companies, although a spokesman stated: “We’re aware that demand may increase for these products given the recent announcements.”

Earlier this year, Foundation Home Loans commercial director Simon Bayley complained that certain lenders are charging up to 100 basis points over their core range for limited company buy-to-let products, 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 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,” stated Mr Bayley at the time.

peter.walker@ft.com