Buy to let opportunities

Thanks to increased competition among lenders, the number of BTL products available has hit its highest level since the beginning of the financial crisis in October 2007, according to data from Moneyfacts. Over the past 12 months, the total number of available BTL products has risen by 21% to 2,396 in June, up from 1,929 the previous year.

The average mortgage rate has dropped thanks to the increasing options here, with an average two-year fixed rate now at 2.88% (compared with 6.36% in October 2007). These increased options and lower mortgage rates show there are currently some good opportunities out there for landlords.

Expanded options have also been seen in lenders’ criteria. As more challenger banks in particular have entered the BTL mortgage market, they are increasingly looking to specialise in criteria for professional landlords.

As a landlord, these are the five main points of setting up a limited company

Limited companies pay corporation tax, not income tax.

Corporation tax will drop to 17% in 2020, while private landlords face income tax of up to 40% for higher-rate taxpayers. Limited companies pay tax on profits, not income, so are treated differently to individual landlords. Mortgage interest payments remain tax-deductible.

Limited company landlords may access larger loans

The changes to underwriting criteria for landlords have affected affordability calculations. It is not uncommon for them to request rent to typically cover up to 145% of interest payments for private landlords. The Prudential Regulation Authority’s changes did not affect portfolios managed in limited companies; typical rental cover has remained at 125%.

Healthy figures for buy-to-let companies

The proportion of properties let by company landlords has increased to 12% as of July this year.

Data collected by Hamptons International explains that this is the highest number of properties let by company landlords recorded since the firm’s records began eight years ago.

The estate agent estimates that collectively company landlords own 641,480 homes in Great Britain, 42% higher than the figure in 2015.

Regionally, landlords in London were most likely to own a buy-to-let property using a company structure, at 13%. This was followed by Scotland, the south excluding London, and the midlands all at 12%.

Furthermore, the data shows that the average cost of a new let in Great Britain rose to £986 per month in June, a 3.1% rise year-on-year.

Mortgages are getting cheaper

Landlords can make savings by switching their buy-to-let (BTL) mortgages as average costs have started to fall.

The latest analysis shows that the cost of a 60% Loan-to-Value (LTV) BTL mortgage is now 3% lower than it was three months ago.

Meanwhile, the same product with an LTV of 70% now costs 2% less than it did in March, with cost for an 80% LTV falling by 0.5% during the same period.

The cost reductions offer investors potential annual savings of £234, £144 and £36 respectively on a typical £150,000 mortgage.

The report also recorded 2% reductions in the cost of 60% and 80% LTV five-year fixed BTL mortgages over the last three months.