Almost half of brokers expect growth in limited company lending

According to a survey of 247 mortgage intermediaries by BVA BDRC on behalf of Paragon Bank, a further 38 per cent expect an increase in personal name non-portfolio buy-to-let limited company business.

Around 14 per cent of brokers surveyed said they expected more personal name portfolio business, with approximately six per cent predicting an increase in personal name non-portfolio buy-to-let lending.

The report added that mortgages written to portfolio landlords operating through limited companies made up just under a quarter of cases placed by brokers.

However, brokers said that this would increase due to “favourable tax treatment of incorporated businesses”.

Figures from BVA BDRC earlier this year indicated that 62 per cent of landlords who planned to grow their portfolio would buy properties with a limited company structure.

‘A more tax-efficient structure’

Louisa Sedgwick, Paragon Bank’s commercial director of mortgages, said: “With such a strong emphasis on the specialist section of the market, lending to landlords operating as limited companies has long been one of Paragon’s strengths and we’ve seen an increase in this type of business in recent years.

“Owning properties through limited company structures can be more tax efficient because of the ability for investors to offset finance costs, such as mortgage interest, against rental income. In addition, those applying for mortgages through limited companies are often stressed at 125 per cent, compared to the 145 per cent that landlords applying as individuals are subject to.”

She added: “While limited company structures may not be the best option for every landlord and we’d always recommend seeking professional, independent advice, these advantages are becoming even more evident in the current market where the unsettled economy has made it necessary for lenders to tighten up stress testing.

“This is why I think the brokers we spoke to have got it spot on and we’ll continue to see a shift towards more limited company lending.”