Mortgages 

End nigh for lenders overcharging on Ltd buy-to-let

End nigh for lenders overcharging on Ltd buy-to-let

Market forces will ensure it will soon not be an issue for buy-to-let investors to find lenders who do not overcharge for limited company buy-to-let mortgages, Foundation Home Loans commercial director Simon Bayley said.

Last year chancellor George Osborne announced a 3 per cent premium on stamp duty for buy-to-let investors and individuals buying second homes, aimed at raising £1bn by 2021.

David Whittaker, managing director of Mortgages for Business, said buy-to-let investors are currently ‘outfoxing’ HM Treasury by getting a mortgage as a limited company rather than as an individual.

The Kent-based intermediary said there were 122 mortgage products available for limited companies and investors could take advantage of the tax benefits associated with registering as a limited company.

Research by Kent Reliance last month also revealed the chancellor’s decision to increase tax bills for individuals who invest in buy-to-let triggered a surge in borrowing through companies.

One quarter of all buy-to-let mortgage finance demand is now through limited companies, up from 13 per cent a year ago, according to Kent Reliance.

According to Foundation Home Loans’ Mr Bayley, 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” in the limited company buy-to-let market.

He said: “Certain lenders are charging up to 100bps extra for this product over their core range, 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.

Mr Bayley said: “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.”

Last week Hargreaves Lansdown boss Ian Goraham said it was time to forget buy-to-let investment as it was expensive and did not compare favourably with investing in funds.