"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."
Nearly half of mortgage brokers expect the volume of buy-to-let portfolio limited company lending they write to increase in the next 12 months, according to research by Paragon Bank.
49% of intermediaries expect to place a higher volume of buy-to-let mortgages written to portfolio landlords operating through limited companies over the period, with a further 38% anticipating more non-portfolio limited company business.
Only 14% of brokers expect more personal name portfolio business in the period, with just 6% expecting growth in personal name non-portfolio buy-to-let lending.
Mortgages written to portfolio landlords operating through limited companies currently account for just under a quarter (24%) of cases placed but brokers predict this to rise due to the favourable tax treatment of incorporated businesses.
A separate BVA BDRC survey of landlords covering the first quarter of this year showed also that 62% of those intending to expand their portfolios plan to purchase properties within a limited company structure, up from 43% in Q3 2021.
Further Paragon research found that a profitable full-time income is made by 43% of landlords whose portfolios are owned within a limited company structure, compared to 26% amongst investors who hold properties in their personal names.
Louisa Sedgwick, commercial director of mortgages at Paragon Bank, 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%, compared to the 145% that landlords applying as individuals are subject to.
“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.”
