Buy-to-let limited company

Half a decade ago, there would have been few in the mortgage market who might have predicted limited company buy-to-let as one of the major growth areas in the years ahead. Without reckoning on some considerable government and regulatory intervention, how could they know?

But, that’s exactly what the buy-to-let sector and landlords have been subjected too, and while there appears to be no let-up in that regard, the market has shifted to accommodate how landlords might wish to take their portfolios forward and how they can try and secure the mortgage interest tax relief which has been steadily cut for those holding properties in their own names.

While we might not have seen a big move of existing rental properties into limited company vehicles – blame the stamp duty increase for that – landlords are now much more likely to purchase new properties within a limited company vehicle, and because of this, even our very biggest buy-to-let lenders have needed to respond to the shifting nature of the sector. Indeed, as time goes by, and landlords see how the ongoing cuts to mortgage interest tax relief impact on their profitability, you can’t help wondering if – even with the large stamp duty outlay – landlords might feel they need to bite the bullet and move existing properties (held in their individual names) into those limited companies.

New lending figures show a healthy and robust sector

although some in the press would have you believe otherwise.

Lending figures published by UK Finance show how resilient the buy-to-let sector is.

In 2018, lending totalled £36.8bn compared with £35.6bn in 2017. There has also been a spike in re-mortgages following the two-year anniversary of the stamp duty land tax surcharge and we may see more of the same this year as landlords come out of three-year products taken out in the run-up to April 2016.

The lending figure for January this year – £3.28bn including product transfers – was up month on month and only down very slightly compared with January 2018. These results hardly indicate pending doom – but neither do they sell newspapers.

Demand is still growing for quality rental properties

Demand for quality rental property continues to grow, this year alone it’s grown by 7% against figures issued for last year. All the measures the Government have taken to curtail the buy-to-let market really don’t seem to of had the desired effect.

Buy-to-lets are stable

Buy to let mortgage costs remain stable with little movement recorded over the past three months according to a market snapshot.

As an example, the cost of a number of two- and five-year fixed rate BTL mortgages have remained static when compared to the costs at the beginning of December 2018.

By contrast, the cost of a three-year fixed BTL 70% loan-to-value mortgage is now two per cent higher than it was in December and equates to an annualised cost increase of £125.

Longer-term analysis, however, does show that the BTL market is still in a healthy position compared to this time three years ago – a period when the controversial three per cent additional homes stamp duty hike for landlords was introduced.

The cost of a 60% LTV five-year fixed BTL mortgage, for example, is now 11% lower than it was in March 2016, while a 60% LTV two and three year fixed are 7 and 10% cheaper.

London’s landlords are looking further afield

The majority of London-based landlords, 59% in fact, invest outside of the capital, according to the monthly lettings index.

Historically, landlords in London do not look far afield for their buy-to-lets. However, recent figures show that due to high house price growth and a clampdown on landlord taxation, many are looking to other regions of Great Britain to buy.

The data shows that the average landlord buying in London in the year to March 2019 faced a £24,600 stamp duty bill, compared to £5,330 outside the capital.

Furthermore, the figures show that in the last 12-months, 34% of London-based investors bought BTL properties in the Midlands and the North, up from 14% in 2015.

The most popular region outside of the capital for London-based landlords to purchase a BTL property in was the South East, at 11%. This was followed by the East Midlands and the East of England, with both recording 10%.