The proportion of buy-to-let deals available to limited companies has doubled in just one year as the market responds to the government’s tax changes.
One year ago, limited company products made up just ten per cent of the buy-to-let market, but the figure is now 20 per cent, according to research from moneyfacts.co.uk.
Limited companies were not affected by the changes to mortgage interest tax relief that were announced by George Osborne in 2015 and introduced on 6 April this year.
The changes mean mortgage interest tax relief will gradually be cut back to 20 per cent between 2017 and 2020, making a significant dent in landlords’ returns.
In April, independent broker Mortgages for Business revealed 77 per cent of all BTL purchase applications are now being made via a corporate vehicle – an all-time high.
BTL deals available to limited companies
| | 5 years ago | A year ago | 6 months ago | Today |
| Number of Limited Company Products | 30 | 133 | 201 | 313 |
| Overall Percentage of the BTL Market | 5% | 10% | 13% | 20% |
Charlotte Nelson, finance expert at moneyfacts.co.uk, said: “Despite the boost in product numbers, borrowers considering this type of mortgage should be aware that they could find themselves on a more expensive deal compared to the rest of the BTL market.
“For example, the average two-year fixed rate BTL mortgage for those applying as a limited company stands at 4.22 per cent today, whereas the average two-year fixed rate for the rest of the market is significantly less at 2.97 per cent.
“With all the extra legwork a limited company option entails, any borrowers considering it should consult a financial adviser to ensure it is the right route for them.”
Garry Filby, financial adviser at Reading-based Financial Aspects Ltd, said he had not seen a big rise in limited company applications during the past year.
“The individual buy-to-let market was manic two years ago - up until the deadline of the stamp duty surcharge, we were inundated,” he added.
“Since then, we have had probably one enquiry. We have had one or two enquire about [limited company borrowing], but when we looked into it, it was not a feasible option.”
simon.allin@ft.com
