Limited company buy-to-lets increasing

Nearly two thirds of landlords – 64% – with four or more properties intend to use limited company status for new purchases this year, according to recent figures.

This compares to the 41% figure recorded in Q1 2018.

Meanwhile, 21% of landlords with four or more properties intend to buy more as an individual, according to the lender’s research.

While 44% of landlords across the market who plan to buy will use limited company status, just 17% of those with one to three properties share this intent.

According to the figures, limited company status is growing in popularity as the phased reduction in mortgage interest tax relief does not have an effect on limited company landlords.

Huge choice

The number of buy-to-let mortgage products currently available is at a post-financial crisis high, according to Moneyfacts.

The financial information provider said that landlords now have the choice of 2,162 buy-to-let mortgages, meaning the number of products has not been higher since October 2007.

Just two years ago there were only 1,456 products for landlords to choose from.

It is encouraging that buy-to-let landlords have more mortgage choice than they have had at any time in almost 12 years. Total product numbers have increased by 397 over the past year and by 706 over the past two years to stand at 2,162 products today.

Despite ongoing uncertainty in the property market, providers are not shying away from offering landlords a greater choice of products.

Fixed rate mortgage, what is it?

If you take out a fixed-rate mortgage, the interest rate on the deal will be locked in place for a fixed period, whether that be two, three, five or 10 years.

For example, you might get a five-year fixed-rate mortgage charging 2%. You are guaranteed to pay that rate for the whole five-year period, whatever happens to wider interest rates or the economy.

This gives a borrower certainty in knowing how much their monthly mortgage repayments will be. For many households that is a major help in budgeting. Just a 0.5% rate rise could add hundreds of pounds to your monthly mortgage bill.

General misconception in buy-to-let

There seems to be a misconception in the buy-to-let space at present that no new ‘landlords’ are entering the sector and that it’s purely the preserve now of the established, professional landlord with at least half a dozen properties to their name.

Of course, we have seen a growing ‘professionalisation’ of buy-to-let and this will continue but this doesn’t mean that new landlords are not eyeing up the opportunities that exist, particularly in what can now be described as a ‘soft’ housing market.

What we have seen however – and this is clearly down to the PRA lending changes, the tax changes and the increase in stamp duty for the purchase of additional property – is that the “get rich quick landlord” has been put off because this is a market which cannot deliver that type of short-term reward anymore. Indeed, while it hasn’t for some time, the recent regulatory and taxation changes make this impossible.