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Uncompetitive limited company BTL products can’t last, says FHL

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  • 18/01/2016
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Uncompetitive limited company BTL products can’t last, says FHL
Foundation Home Loans (FHL), the Bracknell-based specialist buy-to-let lender, said lender competition will ensure that landlords ‘do not have to look far’ to find lenders that don't charge a premium on limited company buy-to-let mortgages.

FHL announced in December that its own limited company buy-to-let mortgage would be priced at the same rate as its core range, followed by Aldermore in January.

From 6 April 2017, mortgage loan interest will no longer be deductible from rental income and will be eligible for tax relief on basic rate tax instead rising over the next four years.

The profits from Special Purpose Vehicles (SPV) or limited companies buy to lets will still be subject to corporation tax at 20% but calculations from FHL suggest a landlord could save £600 a month on one buy-to-let property with a PAYE income of £42,385 inside an SPV.

According to FHL commercial director, Simon Bayley, at a time when landlords are under pressure because of tax and Stamp Duty changes, it cannot be right to expect clients to stump up extra just because of the ‘lack of choice.’

Bayley said: “Certain lenders are charging up to 100bps extra for this product over their core range, when the risk is no different – effectively asking landlords to pay any tax saving from using a limited liability company structure to the lender instead.

“Fortunately, the intermediary community is far too canny to go on selecting lenders who decide on this kind of pricing model. As soon as they realise that there are lenders who are not in the market to take short term advantage of landlords keen to minimise their tax exposure, then I am sure that market forces will dictate that this kind of overpricing will quickly disappear. It certainly will not win any friends among advisers and their landlord clients in the long term.”

Brian Murphy, lending manager at Mortgage Advice Bureau, said a lot of the lenders who operate in the buy-to-let market don’t offer limited company buy-to-let yet.

“The structure of the market hasn’t changed but if they choose to lend in the future, that will change the dynamic and the rates will come down. Its apparent more brokers will want to look at using this sector of the market.”

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