Landlords switch to limited companies
In a bid to beat the tax changes and save profits, growing numbers of landlords are opting to use limited companies for their buy to let portfolios.
According to Mortgages for Business, 77% of BTL applications in the first three months of 2017 were made from a limited company.
That's up from the 69% recorded at the end of 2016 and much higher than the 21% recorded in the summer of 2015.
Landlords are facing a threat to their profitability since the amount of mortgage interest they can offset against tax will be reduced from this month.
The move follows the stamp duty surcharge as well as tighter lending criteria being imposed from the Bank of England.
However, limited companies will not be affected by the change to mortgage interest tax relief.
Buy to let products available for limited companies
The firm also reveals that the number of buy to let products that are available for limited companies has risen substantially.
Their analysis reveals that in the first three-months of this year, the average number rose by a third to reach 266.
David Whitaker, the chief executive of Mortgages for Business, said: “There's no surprise that lenders are keen on limited company borrowers and we have been recommending that clients seek professional tax advice to see whether incorporating is suitable for their circumstances.
“Our figures will encourage landlords to consider what their position is going to be.”
The analysis also reveals that demand from property investors is showing no signs of abating as more landlords decide changes to mortgage interest tax relief will not deter them from making a property investment.
Mr Whitaker added: “This is the changing face of the BTL mortgage market.”
Buy to let is a safe investment
Meanwhile, a report from consultants Allsops reveals that many investors believe that buy to let property is still a safe investment over the long-term.
In a report, the firm says that property has delivered impressive returns and outperformed every other major asset class over recent years.
This is despite measures brought in by the government to curb buy to let growth.
The report also reveals that 37% of landlords say rents will grow in the next six months, while 44% of landlords said they had ‘very good’ or ‘good’ expectations for their own portfolio.
A spokesman for the firm said: “For those who have equity to invest, buy to let returns have the potential for outstripping savings account over a long-term.”