Almost half of the mortgage brokers anticipate a surge in buy-to-let portfolio lending via limited companies over the next year, according to a research conducted by Paragon Bank.
The study revealed that 49% of intermediaries foresee an uptick in buy-to-let mortgages issued to portfolio landlords operating through limited companies, with an additional 38% predicting increased non-portfolio limited company business.
The research indicated a mere 14% of brokers expect a rise in personal name portfolio business, with only 6% anticipating growth in personal name non-portfolio buy-to-let lending. The study was carried out by BVA BDRC for Paragon’s Mortgage Intermediary Insight Report (MIIR).
The findings suggest that mortgages issued to portfolio landlords via limited companies currently make up nearly a quarter (24%) of cases. However, brokers expect this number to grow, due to the advantageous tax treatment of incorporated businesses.
In a separate BVA BDRC landlord survey covering Q1 2023, it was discovered that 62% of landlords planning to expand their portfolios intend to buy properties within a limited company structure. This is a notable increase from the 43% recorded in Q3 2021.
Louisa Sedgwick, Paragon Bank commercial director of mortgages, said: “With such a strong emphasis on the specialist section of the market, lending to landlords operating as limited companies has long been one of Paragon’s strengths and we’ve seen an increase in this type of business in recent years.
“Owning properties through limited company structures can be more tax efficient because of the ability for investors to offset finance costs, such as mortgage interest, against rental income. In addition, those applying for mortgages through limited companies are often stressed at 125%, compared to the 145% that landlords applying as individuals are subject to.”
She added: “While limited company structures may not be the best option for every landlord and we’d always recommend seeking professional, independent advice, these advantages are becoming even more evident in the current market where the unsettled economy has made it necessary for lenders to tighten up stress testing.
“This is why I think the brokers we spoke to have got it spot on and we’ll continue to see a shift towards more limited company lending.”
