Limited company buy-to-let purchases outstripped remortgages in Q4

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  • 18/01/2018
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Limited company buy-to-let purchases outstripped remortgages in Q4
Almost three-quarters of buy-to-let (BTL) mortgage transactions in Q4 2017 made by landlords through limited companies were for purchase, rather than refinancing.

The findings were published in the Mortgages for Business Limited Company Buy to Let index, revealing that 72% of all BTL limited company transactions were new acquisitions – contradicting the longstanding preference of borrowing for remortgages.

However, Mortgages for Business says that this trend will be unlikely to continue, because the popularity of using limited companies as vehicles for BTL transactions has only been growing for a relatively short period of time – and as the number of remortgages accounting for incorporated BTL activity is expected to grow as early-redemption charge (ERC) periods expire.

Furthermore, while most of the BTL purchase transactions made through limited companies concerned buying additional properties, the figures also include landlords selling property they already own personally into a corporate structure – as transfers of property between from individuals to limited companies are treated as new purchases.

 

Popularity

According to the mortgage broker, landlords opting to use corporate structures for portfolios has been growing rapidly since July 2015 – when incremental reductions to higher income tax rate relief on BTL mortgage interest and other finance costs were announced.

This movement has also been compounded by the more stringent affordability guidelines introduced by the Prudential Regulation Authority (PRA).

The index also revealed that the proportion of BTL mortgages available to limited companies grew in Q4 from 21% to just under 25% of all products.

Steve Olejnik, chief operating officer at Mortgages for Business, commented: “To help landlords determine whether using limited companies is the right strategy for them, we’ve been encouraging our clients to take professional advice.

He continued: “We will also continue to produce guides and webinars which explain how the tax and regulatory changes might impact their investments.”

“The landscape of buy-to-let is changing and it’s important that landlords are equipped to traverse the terrain,” added Olejnik.

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