Taylor Scott International News
The decision by the UK government to charge an extra 3% in stamp duty on but to let property buyers from April this year has led to a sharp increase in demand for limited company lending. New research shows that property investors looking for finance using a limited company has increased and at the same time the number of buy to let lenders offering finance to limited companies has also risen. The latest index from Mortgage for Businesses, covering the second half of 2015 shows that new applications for limited company buy to let mortgages had dipped to 15% of all buy to let applications in October but, then, almost immediately started to rise sharply, spurred on by the stamp duty surcharge announcement. By December, new limited company buy to let applications accounted for just over 38% of all buy to let applications. Completions for limited company buy to let mortgages accounted for nearly 22% of all buy to let completions in October, up from nearly 17% the previous month and this increased to 24% in December. ‘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 individuals paying the higher tax rate were announced by the government in the Summer Budget,’ said David Whittaker, managing director at Mortgages for Business. ‘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,’ he explained. ‘The stamp duty surcharge has also had a direct impact on activity with investors trying to get purchases completed before 31 March 2016, particularly as the actual rules where the surcharge will apply will not be confirmed until 16 March 2016,’ he added. The index also shows that almost a third of buy to let lenders offered products to limited companies in the second half of the year, up from 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 the second half of 2015, up from 99 in the first half of the year. ‘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,’ said Whittaker. In December 2015 products for limited companies were, on average 0.7% points more costly than the market as a whole, a marginal reduction compared to July when it was 0.8%. The average limited company rate in December was 4.4%, down from 5.4% in July. Across… Taylor Scott International
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