Buy-to-let  

Limited company buy-to-let borrowing at all-time high

Limited company buy-to-let borrowing at all-time high

The use of a limited company to borrow for buy-to-let property purchase has soared to an all-time high, figures reveal.

Some 77 per cent of all BTL purchase applications are now being made via a corporate vehicle, up from 69 per cent of applications in the fourth quarter of 2016, according to data from independent broker Mortgages for Business.

Customers have a much greater range of mortgages to choose from, as the average number of products available to limited company borrowers has risen by more than a third to 266, with fixed rates cut across all terms.

The average three-year fixed rate for limited company borrowers is now just 0.5 per cent higher than equivalent products available in the wider market.

Use of limited companies as investment vehicles has more than trebled from just 21 per cent of applications before the 2015 summer budget, when changes to tax relief on BTL properties were announced.

The reduction of tax relief for individual landlords means that many people in this situation will choose to set up a limited company for their buy-to-let portfolio, which can be cheaper overall.

Commenting on the results, David Whittaker, chief executive of Mortgages for Business, said: “With the changing face of the buy to let mortgage market, it is no surprise that lenders are keen to appeal to limited company borrowers. 

“We have been recommending for some time that our clients seek professional tax advice to determine whether incorporation is the most suitable route for their circumstances, and these figures can only further encourage landlords to consider their position.”

Michelle Lawson, director at Lawson Financial in Fareham, said more and more clients are using limited companies to invest in BTL.

“We are seeing growing demand, but we are also referring clients to an accountant, and I won’t do a mortgage until they have actually spoken to an accountant,” she added.

“We have also to be careful of whether the government will make that the next hit. Will they all of a sudden clamp down on people with properties in limited companies? That could be the next thing.”

simon.allin@ft.com