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Rise in BTL portfolio limited company lending

Journalist: Jake Carter, Mortgage Introducer

ended 13. July 2023

Around one in two mortgage brokers expect the volume of buy-to-let portfolio limited company lending they write to increase in the next 12 months, according to specialist lender Paragon Bank.

Is this something you expect to see? If so, why?

Why is this area of the buy-to-let market beating the curve?

How would this increase impact the wider buy-to-let market?

7 responses from the Newspage community

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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Limited company Buy To Let lending will certainly increase over the next 12 months. With the tax advantages of being able to offset the mortgage interest under a limited company or special purpose vehicle (SPV) well established, this is type of borrowing is now further benefitted from lower "stress-test" rates than personal buy to let borrowing, which with the increasing rates and rents often yet to catch up, makes borrowing more achievable via this route. Lenders seem to appreciate this also, with more and more mainstream lenders now in this market sector, and their rates becoming more competitive against the personal Buy To Let product options.
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Justin Moy
Managing Director at EHF Mortgages
Buying within a Limited Company structure has been popular for a number of years, given more preferential borrowing power as well as the improved taxation situation, balanced off with slightly higher mortgage rates for those situations. Being able to fully offset the interest cost against rent, unlike the personal ownership of BTL's, has been a real incentive for higher rate taxation, but flexible ownership of the property through share distribution of the company makes it an attractive way to manage elements of Inheritance Tax planning. But the ability to borrow more than most can achieve in their personal names, and reduce the overall tax costs, are the main benefits and reasons why we have seen over 75% of all our new BTL purchases through this type of arrangement. We have also seen more lenders in this market, and thus rates have become more competitive. Once rates normalise we should see plenty of uptake in this area.
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Elliott Culley
Director at Switch Mortgage Finance
Portfolio landlords are taking advantage of smaller/accidental landlords leaving the market due to the current turmoil on rates and the squeeze on profits . Placing a buy to let in a limited company is more cost effective for portfolio landlords. Most have built up profits in recent years and are now looking to take advantage and buy property more cheaply and grow their portfolios. I am seeing more interest in HMOs or multi unit freehold properties where the rental yield is much better.
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
I'd expect to see this for 2 reasons. Firstly all the reforms and added costs of being a landlord are driving dabblers 'and 'accidental landlords' from the market yet with huge rental demand, serious investors are acquiring stock in a cooler purchase market. Secondly if you own a BTL in personal name and can no longer offset your new whopping interest rate against your profit for tax purposes, it's a total no brainer for many clients to go down the ltd company route where you can. This could be the difference between a portfolio that actually costs you money vs. one that makes money in many situations.
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Graham Cox
Director at Bridging Hub
It's very likely landlords will start purchasing rental properties through Special Purpose Vehicle Limited Companies or SPVs for short. There are tax advantages to doing so, particulary for higher rate taxpayers. For example, mortgage interest payments and other financing costs can be deducted as a business expense.

The other main advantage is the Interest Cover Ratio tends to be lower, typically 125% versus 145% for higher-rate taxpayers who purchase in their own name.
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Alastair Hoyne
CEO, Finanze Capital at Finanze Capital
I do expect to write more BTL LTD company mortgages in the next 12 months, this increases every year as owing btls in personal names is something of the past now. Even first-time landlords now set up SPVs to purchase their properties in, knowing this will be most beneficial as their portfolio grows. This area of the BTL market can beat the curve due to the tax benefits obtainable here, rather than being taxed up to 45% they will often only be taxed at a maximum 25% so a huge saving! I expect that more lenders will start to offer LTD company BTL products if they already do not, most lenders do as there has been a steady rise in this type of BTL over the last 5 years however there are still a number of lenders out there that need to start offering these products.
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Austyn Johnson
Founder at Mortgages For Actors
People with BTL properties often get caught in the tax process, a LTD company can help to minimise your tax. Its something that needs to be thought about carefully before you do it, but by and large, it seems like a good route to go. Especially if you are already getting close to a new tax band. I would say that we have had a 50% rise in it from 2 years ago.