For the first time, limited companies have outdone landlords when it comes to buy-to-let lending. We've previously discussed the increasing number of buy-to-let lenders deciding to incorporate, due to recent tax changes. Now, we've reached a point where these incorporated landlords make up 51% of lenders by volume.
The data, taken from Mortgages for Business, shows that in the second quarter of 2017 (April-June), limited companies borrowed more than landlords when looking at the volume of buy-to-let in British pounds. In fact, limited companies performed 73% of buy-to-let purchase completions, an increase of more than 10% on the 62% figure from the first quarter of the year.
When it comes to remortgaging, individual landlords still outperform limited companies, but not by much, with the volume of remortgage lending for limited companies increasing by 2% to 40%. What this could mean is that while first-time landlords are buying properties after incorporating, possibly following expert advice, existing landlords are still hesitating to make the jump.
Steve Olejnik, COO of Mortgages for Business, commented: "Landlords are increasingly looking to limited company structures because of the benefits they bring in the form of tax efficiencies and softer affordability testing. The structures are not without their hurdles, however, and we recommend all our clients take professional tax advice before deciding how to proceed."
So, given the difficulties that existing landlords may face when switching to a limited company, is it worth the hassle? We can't answer this from a tax perspective, as this will require tailored, expert advice, but we can look at overall rates and availability.
Back in April, we revealed that the number of products for limited companies had increased, from 13% in October 2016 to 19% in April. Our latest data shows that this rise has slowed, with 20% of the buy-to-let deals on the market available to limited companies today, only a one percent increase over the last four months (from 303 deals in April to 311 today).
In better news, our figures show that the average rate available on these products has fallen by 0.23% for both two and five-year fixed products, which now stand at 3.99% and 4.58% respectively. In contrast, rates across the entire buy-to-let market have not seen much movement, though they do remain lower, with a fixed average two-year rate of 2.91% and a five-year equivalent of 3.56% across the whole market (down 0.02% and 0.11% on April respectively).
This lack of significant movement in the general buy-to-let market, as compared with the downward movement in the rates of those products available to limited companies, indicates that if you're looking for a general buy-to-let mortgage, you may want to search through the Best Buys and move fast, as rates could be stopping their downward fall or even going up soon instead.
If you're looking for a limited company product, then you could gamble on rates decreasing further, or take advantage of the lower rates now. Regardless, it would always be wise to seek professional advice before deciding whether to incorporate or not.
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.