From 15% of all buy-to-let applications in October, data from commercial specialist broker Mortgages For Business (MFB)’s limited company mortgage tracker, showed applications for limited company buy to let mortgages rose sharply to 38% of the market in December.
As more lenders launched new types of limited company buy-to-let mortgages, including Paragon and Foundation Home Loans, the numbers of lenders offering the deals rose from 30% in H1 to 36% at December-end.
Limited company completions also leapt to over 24% of all buy-to-let deals.
David Whittaker, managing director at Mortgages for Business said: “The increase in limited company buy to let activity is to be expected since the proposed restrictions to buy to let mortgage interest relief for individuals paying the higher tax rate were announced by the government in the Summer Budget (in July).”
The Stamp Duty surcharge announced in the Autumn Statement in November has acted like a starter gun with 83 days to go for investors driving to complete purchases before the 31 March this year.
Nearly a third of buy to let lenders offered products to limited companies in H2, up from 23% in the first half of 2015. However, by the end of December this figure had risen to 36%.
The number of limited company products also shot up from 99 in H1 to 147 in H2.
David Whittaker said: “It’s good to see that the results continue to disprove the theory that there are insufficient products available to limited companies. It’s also interesting that pricing has come down, if only marginally. I wouldn’t be at all surprised if rates for limited companies reduced further in the coming months but I doubt we’ll see huge falls.”
The average buy-to-let product rate has fallen from 4.6% in July to 3.7% in December, but limited companies are 0.7% points more costly than standard products. The average limited company rate in December was 4.4%, down from 5.4% in July.
Whittaker said when the tax rates change, mortgage brokers should not be shocked to see a two-tier affordability stress testing culture emerge from lenders to reflect the differential between landlords sheltered from the tax changes and standard product-holders.
Whittaker added he expected the FCA to be watching the affordability implications of the tax changes for landlords carefully.
