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Limited company buy to let purchases outstrip remortgaging

Almost three-quarters of buy to let mortgage transactions made by landlords operating via limited companies in the final quarter of last year were used to buy property rather than for refinance purposes, according to specialist broker Mortgages for Business.

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

This is because all transfers of properties from individuals to limited companies must be treated as a new purchase, and therefore do not qualify as a remortgage.

Throughout 2017, the interest in landlords using corporate structures from which to operate their portfolios has continued to grow rapidly. 

Mortgages for Business says this sea-change in behaviour was triggered back in July 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.

“To help landlords determine whether using limited companies is the right strategy for them, we’ve been encouraging our clients to take professional advice. The landscape of buy to let is changing and it’s important that landlords are equipped to traverse the terrain” explains Steve Olejnik, chief operating officer at Mortgages for Business.

Remortgaging accounted for fewer buy to let transactions than purchases because of the relatively short period of time in which limited companies have been growing in popularity.  

This number is expected to grow as early repayment charge periods expire, allowing landlords to refinance without penalty.

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