63% of applications by landlords purchasing buy-to-let properties are being made using a limited company structure, according to the findings of Mortgages for Business’ Limited Company Buy to Let Index for the third quarter of 2016.
This figure is up from just 21% before the changes to tax relief on mortgage interest were announced by George Osborne in July 2015.
Mortgages for Business claims this represents a “sea change” in landlord behaviour and includes both new purchases and “transfers”, i.e. purchases made by landlords selling their personally owned property to their limited company.
In contrast, the number of remortgage applications made via a limited company has remained at a fairly similar level and are not expected to rise greatly until those who have recently used a corporate vehicle to purchase property are free from early repayment charges.
In terms of market share, buy-to-let mortgage products available to limited companies now accounts for 16% of all products, up from 13% in the first half of the year. By number however, availability has remained stable at 195 (average) as the overall number of buy-to-let products on the market dipped slightly.
The index also found that the average rate of a buy-to-let mortgage fell to 3.3% at the end of September, down from 3.7% in June. Of the products available to limited companies, rates fell to an average of 4.3%. This means that rates available to limited companies are only around one percentage point higher than the average market value.
David Whittaker (pictured), managing director of Mortgages for Business, said: “Many lenders with products for both personal borrowers and limited companies, offer the same rates to both. At the moment, some of these lenders accept only SPV limited companies, including Foundation Home Loans and Paragon.
“Some of the more specialist lenders, and I’m thinking primarily of Aldermore Bank, InterBay Commercial, Shawbrook and our own lending band Keystone Property Finance, also offer the same rates to trading limited companies.”
Data for the index is obtained from Mortgage Flow, Mortgages for Business’s bespoke buy-to-let product sourcing software and from its own transactional records.