Ltd Co BTL transactions rose sharply in Q4 2015

The results of the H2 2015 Limited Company Buy to Let Index indicate a sharp increase in activity from investors looking for finance using a limited company.

The number of buy to let lenders offering finance to limited companies has also risen as has the availability of products.

According to transactional data, new applications for limited company buy to let mortgages had dipped to 15% of all BTL applications in October but then, almost immediately started to rise sharply, spurred on by the stamp duty surcharge announcement.

By December, new Ltd Co BTL applications accounted for just over 38% of all BTL applications, a real step change in investor behaviour.

This renewed vigour was also seen in completions for limited company buy to let mortgages which accounted for nearly 22% of all BTL completions in October, up from nearly 17% the previous month.

By December this figure had risen to a little over 24%.

By case count and volume (£m loan amount) activity was also on the rise in H2 2015. The number of buy to let mortgage applications made by limited companies accounted for 21% of all buy to let cases, up from 18% in H1 2015.

When looked at by volume (£m loan amount), limited company applications accounted for c.25% of all applications, up from c.20% in H1 2015.

Commenting on the results, David Whittaker, managing director at Mortgages for Business said:

“The increase in limited company buy to let activity is to be expected since the proposed restrictions to buy to let mortgage interest relief for higher tax rate paying individuals were announced by the government in the Summer Budget.

Operating portfolios via corporate structures is expected to be more tax efficient, particularly for higher tax rate paying individuals, including individuals where the new tax regime will tip them into the higher tax bracket where previously they had remained below it.

“The stamp duty surcharge has also had a direct impact on activity with investors trying to get purchases completed before 31st March 2016, particularly as the actual rules where the surcharge will apply will not be confirmed until 16th March 2016.”

Nearly a third (30%) of buy to let lenders offered products to limited companies in H2, up from just under a quarter (23%) in the first half of 2015.

However by the end of December this figure had risen to 36%.

The number of products for limited company applicants increased by nearly 50% to an average of 147 in H2 up from 99 in H1 2015.

David Whittaker said:

“It’s good to see that the results continue to disprove the theory that there are insufficient products available to limited companies. It’s also interesting that pricing has come down, if only marginally. I wouldn’t be at all surprised if rates for limited companies reduced further in the coming months but I doubt we’ll see huge falls.”

In December 2015 products for limited companies were, on average, c.0.7% points more costly than the market as a whole, a marginal reduction compared to July (c.0.8%).

The average limited company rate in December was 4.4%, down from 5.4% in July.

Across the entire market rates fell from 4.6% in July to 3.7% in December.

Data for the index is obtained from Mortgage Flow, MFB’s bespoke BTL product sourcing software and from its own transactional records.

The index focuses on mainstream buy to let lenders with commoditised products for Special Purpose Vehicles operating via intermediaries.

Lenders with bespoke offerings including high street banks and the commercial arms of the challenger banks, have been excluded from the data.


Read the Limited Company Buy to Let Index H2 2015.

Other research is available from Mortgages for Business including:

Complex Buy to Let Index
This index tracks buy to let mortgage transactions for vanilla buy to let property, Houses in Multiple Occupation (HMO), multi-unit freehold blocks (MUFB) and semi-commercial property (SCP). Results compare average property value, loan size, loan to value and yields. It also tracks the number of lenders operating in the buy to let sector and records the average number of buy to let mortgage products available.

Buy to Let Mortgage Costs Index
Headline buy to let mortgage rates marketed by lenders can often be misleading because they don't take account of fees. This quarterly index aims to outline the real costs of taking out a buy to let mortgage including the impact of fees and charges and underlying cost of funds such as Bank Rate.

Buy to Let Mortgage Product Index
Published monthly the Buy to Let Product Index tracks the number of lenders and buy to let mortgage products currently available in the UK mortgage market.

Property Investor Survey
Designed to gauge the property finance needs of investors and landlords, the anonymous results of each survey are fed back to lenders to help them develop existing mortgage products and design new ones.