Research from moneyfacts.co.uk found that there were 133 buy-to-let limited company products available a year ago. Today, there are now 313 available, representing 20% of the overall market.
Charlotte Nelson, finance expert at moneyfacts.co.uk, said: “It feels like the buy-to-let market has been hit from all angles recently, and this has left landlords feeling vulnerable and wondering whether it is still worth continuing in the buy-to-let sector. This has resulted in a shift in focus to limited companies, away from individual ownership, which is influencing not just landlords but also providers offering buy-to-let mortgages.”
She added: “As the reality of April’s tax changes starts to bite, the proportion of deals available to limited companies has grown dramatically, having increased by 7% in just six months. With the extra pressure in the buy-to-let market and the added interest in limited companies, it is no surprise that lenders have leapt into action and started offering more deals to limited companies.”
However, Nelson was quick to point out that the limited company buy-to-let products came at a cost and said: “Despite the boost in product numbers, borrowers considering this type of mortgage should be aware that they could find themselves on a more expensive deal compared to the rest of the buy-to-let market. For example, the average two-year fixed rate buy-to-let mortgage for those applying as a limited company stands at 4.22% today, whereas the average two-year fixed rate for the rest of the market is significantly less at 2.97%.”
Doug Hall, director at distributor 3mc, recently said his firm was 48% or 49% up on the number of buy-to-let applications through the door when compared to last year and cited a growth in the limited company space as the reason.
Adele Turton, managing director at Plan A Mortgage Brokers, was cautiously upbeat about the rise in product numbers, and highlighted a number of areas where she would like to see further movement.
She explained: “The increase is welcomed, rates are competitive and moving more in line with personal options, although there are only a handful who dominate the top of the rate table most of the time. When considering a case criteria is nearly always key to servicing a landlords requirements.”
She added: “Some of the legal requirements for these products are a little over the top, which means much higher legals costs to the client. We recently completed on a limited inter-company purchase, and the loan was circa £60,000 but his legals were almost £5,000. In a market where costs are starting to mount up for landlords I’d like to see some incentives/less legal requirements from the lenders as well.”
One in five rental properties are now let by limited company landlords, according to research covering Q1 from Countrywide.