The number of buy-to-let mortgage applications completed by limited companies grew to 30 per cent of all completions, up from 21 per cent in the second half of 2015 and 18 per cent in the first half last year.
This is according to the latest statistics from Mortgages for Business, which also found the number of lenders offering products to limited company borrowers increased in the first half of the year to 14, from 12 in the previous six months.
It noted the increase was due to existing buy-to-let lenders introducing limited company products, rather than new lenders entering the sector.
Lenders offering limited company products now account for 42 per cent of the whole buy-to-let lending sector.
Product numbers increased to an average of 154, up from 147 in the last six months of 2015, although the actual proportion of them as a percentage of the whole buy-to-let market fell, due to the increase in product numbers available to individual borrowers.
While average products numbers for limited companies accounted for 13 per cent of all buy-to-let products in the first half of this year, Mortgages for Business noted by the end of June the percentage had risen back to 16 per cent of all buy-to-let products, the same percentage recorded in the first half of 2015.
Data is obtained from Mortgage Flow, the firm’s bespoke buy-to-let product sourcing software, as well as from its own transactional records.
Managing director David Whittaker explained both applications and completions for limited company borrowers appear to have stabilised at around one third of all buy-to-let business.
“However, this masks a dramatic change in the investment pattern for new purchases, where the proportion investing through limited companies has risen from less than 20 per cent by number (25 per cent by value) in the first half of 2015 to over 50 per cent in 2016, with second quarter applications by limited companies running at over 60 per cent of total applications related to purchases of buy to let properties.”
He suggested this increasing proportion will also drive an increase in the proportion of completions in the next quarter.
There has only been a slight uplift in the proportion of remortgaging activity that relates to limited company borrowers, due to historical investment patterns, according to the latest figures.
Some landlords who already own property personally are sitting on their hands though, holding back from remortgaging and waiting to see how the economy pans out post-referendum, Mortgages for Business pointed out.
With the chancellor announcing his intentions to lower corporation tax to 15 per cent following the Brexit result, more landlords may choose to finance buy-o-let via corporate vehicles, it suggested.
“Clearly, the trend for limited company buy to let represents a real step change in behaviour as landlords adapt their investment strategies to mitigate the increased costs brought about by recent changes in the tax regime,” commented Mr Whittaker.
In March 2016, the number of completed limited company buy-to-let applications more than tripled compared to any other month in the first half of the year, as investors, brokers and lenders raced to get deals over the line ahead of the introduction of the stamp duty surcharge on 1 April.
Changes to buy-to-let taxation lead many landlords down the limited company route, but only a handful of high street banks even considered offering such vehicles, with demand met by more specialist lenders.
A recent report from Kent Reliance found lending to limited companies soared to nearly 38,000 mortgages in the first quarter, nearly four times the number issued in the same period in 2015.
According to the lender’s survey of over 1,000 property investors, a third of landlords are now considering limited companies and 7 per cent have already done so.
peter.walker@ft.com
