There was a sharp increase in activity from landlords looking for finance using a limited company during the second half of last year, new figures show.
According to the latest buy-to-let index from Mortgages for Business, the number of limited company buy-to-let transactions in December accounted for 38% of all business, up from 15% in October.
The surge in the number of landlords borrowing through limited companies comes after the announcement in November’s Autumn Statement that stamp duty would increase by 3% in April.
In the Summer Budget, Chancellor George Osborne also said that the amount of tax relief landlords can claim on properties will be reduced to the basic rate of income tax from April 2017.
Limited companies with more than 15 residential properties are exempt from the rise in stamp duty, although the Treasury is currently consulting on this.
The number of products for limited company applicants also increased by nearly 50% to an average of 147, up from 99 in the first half of 2015.
David Whittaker, managing director at Mortgages for Business, said: “The increase in limited company buy-to-let activity is to be expected since the proposed restrictions to buy to let mortgage interest relief for higher tax rate paying individuals were announced by the government in the Summer Budget.
“Operating portfolios via corporate structures is expected to be more tax efficient, particularly for higher tax rate paying individuals, including individuals where the new tax regime will tip them into the higher tax bracket where previously they had remained below it.”
The changes to the tax regime has led to several lenders amending their buy-to-let affordability calculations in response
TSB has increased the rate of interest it uses in its buy-to-let affordability calculation from 5% to 5.5%, while Barclays upped its rental ratio cover from 125% to 135% in November last year.
Aldermore says it has seen an increase in the number of enquiries for buy-to-let products through limited companies following feedback from its brokers.
Charles Haresnape, group managing director of mortgages at Aldermore, said: “With recent changes towards buy-to-let, Aldermore has looked to support those investing through limited companies by reducing rates in order to bring them in line with our product range for consumers.
“With one in five properties in the UK owned by a private landlord, the private rental sector is a hugely important component of the housing market, and supporting buy-to-let landlords is crucial at a time when housing supply pressures have seen the number of number of households renting rise from 2.3 million in 2001 to 5.4 million in 2014.”
The bank has re-introduced its buy-to-let two year fixed deal for individuals at 4.68% for an 80% LTV mortgage.
It has also removed the additional 1% charged on its range of specialist limited company (single residential unit) buy-to-let products.
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