Sharp rise in BTL borrowing via limited companies in H1 2016

Sharp rise in BTL borrowing via limited companies in H1 2016

There was a significant increase in lending to buy-to-let landlords borrowing via limited companies in the first half of this year, fresh figures reveal. 

According to the latest data from Mortgages for Business, the number of buy-to-let mortgage applications completed by limited companies in H1 2016 rose to 30% of all buy-to-let completions, up from 21% in the second half of last year, and 18% in the same period in 2015.

Almost a third - 30% - of all buy-to-let loans were handed to those acquiring property through a limited company, up from a quarter (25%) in H2 2015 and 20% in the first half of 2015.

The data also reveals that the volume of lenders offering products to limited company borrowers also rose in the first half of the year to 14 from 12 in the second half of 2015, reflecting a marginal rise in the number of existing buy-to-let lenders introducing limited company products rather than new lenders entering the buy-to-let sector.

David Whittaker, managing director of Mortgages for Business, said: "Both applications and completions for limited company borrowers appear to have stabilised at around one third of all buy to let business.

"However this masks a dramatic change in the investment pattern for new purchases where the proportion investing through limited companies has risen from less than 20% by number or 25% by value in the first half of 2015 to over 50% in 2016, with second quarter applications by limited companies running at over 60% of total applications related to purchases of buy to let properties. This increasing proportion will also drive an increase in the proportion of completions in the next quarter."

Whittaker pointed out that remortgaging activity has remained more or less unchanged as many landlords who already own property adopt a wait and see policy, "probably waiting to see how the economy pans out post-referendum".

He added: "With the Chancellor announcing his intentions to lower corporation tax to 15% following the Brexit result, we may even witness more landlords financing buy-to-let property via corporate vehicles.

"Clearly, the trend for limited company buy-to-let represents a real step change in behaviour as landlords adapt their investment strategies to mitigate the increased costs brought about by recent changes in the tax regime."

Last week it was suggested that more than 75% of mortgaged buy-to-let acquisitions could go through a limited liability company structure over the next 12 months.

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