As a share of residential lending, buy to let fell to 12.7% at the end of 2017 – the lowest level in four years, according to recent top-line Bank of England figures.
But crucially this data doesn’t include mortgages to landlords who are borrowing through limited companies.
Buy-to-let investors have increasingly set-up limited companies in a response to recent tax relief changes.
As many as seven out of 10 buy-to-let applications for house purchase were made through a limited company in the first three quarters of 2017 – a 45% increase from 2016 – according to data from Kent Reliance.
It means that the Bank of England data is potentially missing a huge chunk of landlord borrowing within its reported buy-to-let figures.
This is backed up by anecdotal evidence from lenders.
Louisa Sedgwick, director of sales – mortgages, Vida Homeloans, said: “Despite the slowdown in the mainstream buy-to-let market, the specialist market for limited company buy-to-let is continuing to show signs of growth.”
The Bank instead captures this Ltd company data under other secured lending, which appears to have held firm, but includes an array of other borrowing.
The Bank of England is now looking at collecting more granular loan level data for buy to let to create a clearer picture of the market.
And from the third quarter of 2018 it expects to start reporting ltd company buy-to-let data.
UK Finance already includes ltd company buy-to-let data – the trade body’s most recent figures show that completions fell by 5.1% on an annual basis, but remortgages increased by 18%.