Buy-to-let  

The Mortgage Lender cuts rates for limited companies

The Mortgage Lender cuts rates for limited companies

The Mortgage Lender has reduced the initial rates on its limited company buy-to-let range to bring it in line with individual pricing.

The lender now offers a two-year fixed rate mortgage at 70 per cent loan-to-value for 3.09 per cent.

This product comes with a completion fee of 1.5 per cent.

It also offers a fee-free five-year fix for 4.02 per cent with £500 cashback.

Another five-year fixed rate comes at 4.05 per cent with a three-year early repayment charge and a 1.5 per cent completion fee.

Deputy chief executive at The Mortgage Lender, Peter Beaumont, said: "The buy-to-let market is becoming more sophisticated in its structure with borrowers choosing a variety of governance options to run their portfolios.

"That means every borrower and every portfolio is different, that’s just real life.

"These changes reflect that growing sophistication and give brokers and borrowers an increased range of fee and interest options to suit all circumstances."

The lender offers buy-to-let mortgages for individual landlords, limited companies and House of Multiple Occupation borrowers.

Limited company lending rose in popularity after the government's cut to interest tax relief available to landlords on their mortgages, which means personal borrowers are not able to deduct all of their mortgage interest when they work out their profits.

Under a limited company structure profits are taxed as corporation tax, currently at 19 per cent, going down to 18 per cent in April next year, whereas individual profits are taxed at the person's income tax rate, typically 20 to 40 per cent or more.

Buy-to-let borrowing via limited companies surpassed personal borrowing by landlords for the first time in the second quarter of 2017, when it made up for 51 per cent of the value of all buy-to-let lending.

But higher rates on those mortgages could traditionally eat into profits.

David Hollingworth, associate director of communications at L&C Mortgages, said: "Limited company lending has been brought into much sharper focus since the change to tax relief on mortgage interest.  

"More landlords, especially those looking to build or grow a portfolio are likely to show interest in limited company structures for ownership in the hope of being more tax efficient.  

"It won’t be right for everyone but there has certainly been more interest, both from landlords and from lenders."

He said up until now the market has largely been driven by specialist buy-to-let lenders but as more lenders come to the market the competition is starting top heat up.

He said: "Interest rates remain rather higher for limited company lending than can be found in the mainstream rates but this, along with other sharper rates, does suggest that more competition is starting to encourage some keener deals.  

"Fees can also be bigger for limited company lending as well although again the broader range of lender offering limited company rates should also start to expand the rate and fee options.  

"The Mortgage Lender has some rates with a 1.5 per cent fee, others with a fixed fee but also has launched some cashback options which help to limit costs.