MfB sees limited company BTL value overtake individual loans

In its latest limited company buy to let index, the specialist broker said limited companies borrowed more per quarter than individual landlords for the first time, including both purchase and remortgage transactions.

Of buy-to-let purchase completions handled by Mortgages for Business, 73% were performed by limited companies, up more than 10% from 62% in Q1.

Limited companies accounted for 76% of buy-to-let lending by volume, up from 63% in Q1. The company said it has seen high volumes of purchase applications from limited companies, making up 77% of buy-to-let purchase applications in Q1 and 78% in Q2.

Although limited company transactions now make up the vast majority of buy-to-let purchases handled by the company, the larger remortgage market is still mostly comprised of individual borrowing, with the growth of limited company borrowing only recently beginning to feed through.

The overall picture by number of cases was 54% individual to 46% limited company (up from 40% in Q1).

Steve Olejnik, COO of Mortgages for Business said: “Landlords are increasingly looking to limited company structures because of the benefits they bring in the form of tax efficiencies and softer affordability testing. The structures are not without their hurdles, however, and we recommend all our clients take professional tax advice before deciding how to proceed.”

The index also shows pricing improvements, particularly for three and five-year fixed rates, as buy to let lenders increase their presence in the limited company space.

Among buy-to-let products available to limited companies, the average three and five-year fixed rates fell by 0.4% each to 3.7% and 4.0% respectively. This narrows the gap with the wider market, with the average three-year fixed rate across all buy to let products 0.2% lower at 3.5%.

Product availability remains static, said Mortgages for Business. There were 273 products available to limited companies for buy to let, compared with 1,220 in the wider buy-to-let market.