Buy-to-let lending through limited companies hits 100,000 in nine months

Limited company lending is expected to continue on a strong path of growth over the coming years as landlords adapt to restrictions on mortgage interest tax relief, which are due to be phased in from 2017.

According to Kent Reliance’s latest Buy to Let Britain report, limited company lending is predicted to total 143,000 for the whole of 2016, rising to 163,000 in 2017.

Despite the raft of incoming changes to the sector, landlord confidence is at its highest in a year, with 54% of 900 investors confident about their portfolio prospects, the report said. Confidence hit a record low during the second quarter of the year, falling to 39%, as landlords were hit by a 3% Stamp Duty premium on second homes, introduced by former Chancellor George Osborne.

Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands in buy to let, warned that there was more to come for the buy-to-let sector in 2017.

“The PRA’s new underwriting standards are due to be implemented, the tax changes begin to take effect, and there is yet more potential intervention in the form of the FPC’s new powers. If the cumulative effect of constant change undermines the expansion of rental properties, this will simply exacerbate the housing crisis,” he said.

Rents are being driven up as landlords feel the bite of tax changes, the report said. Average rents in Great Britain have reached a record high of £881 per month, with costs expected to rise further in 2017.

A third of landlords anticipate they will push up rents in the next six months by an average of 5.4%, equivalent to £571 per year, per household. Tenant demand was cited as a key driver of this, with twice as many landlords reporting an increase in demand as those seeing a decline.

Golding added: “The raft of recent measures aimed at the buy to let sector singularly sought to increase home ownership levels. Ironically, they will achieve the opposite, with even greater upward pressure on rents combined with the prospect of declining real incomes likely to stretch affordability even further. We have warned all along that the tax changes will push up rents, and this is already starting to happen. The ban on often unjustifiably high letting fees is well intentioned. However, it also means landlords could pass higher costs onto tenants, doing little to bring down the overall cost of renting.

“Only through a substantive and long-term building programme across all tenures will we see an end to escalating house prices and rents. The Chancellor has moved to provide more support for house building, but it is not yet enough to see the step-change in supply that we need.”