Buy-to-let limited company mortgages

The majority of the buy to let purchase transactions made through limited companies last year were related to additional property acquisitions, although the figures also include landlords selling property they already own personally into a corporate structure.

All transfers of properties from individuals to limited companies must be treated as a new purchase, and therefore do not qualify as a re-mortgage.

Throughout 2020, the interest in landlords using corporate structures from which to operate their portfolios has continued to grow rapidly and this is continuing into 2021.

This change in behaviour was triggered back in 2015 when incremental reductions to higher income tax rate relief on buy to let mortgage interest and other finance costs were announced by former Chancellor George Osborne. Since then, stricter affordability guidelines imposed by the Prudential Regulation Authority on personal buy to let borrowing has compounded the shift by landlords towards incorporation.

Landlords continue to expand portfolios

It is very clear to us that all the recent unwelcome news regarding Covid-19of has not dampened most landlord’s enthusiasm. In fact, a recent poll showed that one in six landlords are looking to increase their portfolios within the next 12 months.

The poll also showed over 50% of landlords have or are considering incorporating their properties to protect long term profitability and tax efficiency.

The demand for good quality rental property seems to increase monthly, a local estate agent in the South East said, “if the rental property is in good condition it won’t be on the market for long, especially if its 2 or 3 bedroomed and reasonably priced”.

Mortgage and re-mortgage business in this area is highly active with investors in the main looking to re-mortgage to fix a rate for the longer term.

The choice of buy-to-let mortgages is vast and still every week we are seeing new products coming onto the market, especially in the corporate sector.

Landlords have faith for the future

Despite the challenges of coronavirus 45% of landlords are optimistic about the state of the buy-to-let market this year, a survey has found.

However 29% of those surveyed were pessimistic about the buy-to-let market in the coming year and many of these feared landlords would be, in the words of one person, “sitting ducks” when it came to raising taxes to pay for the current crisis.

Landlords, as for many other sectors, 2020 is a year that brought plenty of challenges.

But in the case of landlords Coronavirus and the resulting economic uncertainty came on the back of a raft of regulatory and tax changes over recent years that have left the sector battered and which saw smaller landlords in their thousands throw in the towel.

But, as almost always Landlords resilience shows the buy-to-let sector as a whole is a strong one. Those landlords that have survived may well be stronger and our survey shows them as giving buy to let the thumbs up as we move into 2021.

Landlords should not ignore this

The vast majority, some 81% of Landlords think that their mortgage providers quietly hope they will slip onto their Standard Variable Rate (SVR) at the end of their fixed rate period.

And a significant percentage do precisely that a new poll has found, finding that over 40% have been on their mortgage lender’s SVR at some point in the past.

Of these people, 17% said they have been on their lender’s SVR for up to 12 months, and 21% said they have been on their lender’s SVR for 12 months or more.

Less than half, 45%, of respondents could confirm they had never been on their lender’s SVR, while 18% had no idea whether they had or not.

Nearly half of those polled, 47%, said they do not believe their current mortgage provider would care if they moved to another lender, which reflects the dysfunctional relationship between borrowers and lenders.