Majority of Buy-to-Let Lenders Offer Mortgage Products to Limited Companies

Mortgages for Business’ latest Buy-to-Let Mortgage Index reveals that, for the first time, more than half (59%) of all buy-to-let mortgage lenders offered products to landlords who use limited companies as borrowing vehicles during Q2 of 2019.

There has been a steady growth in the number of providers serving corporate buy-to-let borrowers, ever since the tapered introduction of new tax rules for landlords began two years ago.

The findings of this research have also been reflected in the total value of buy-to-let mortgage applications completed in the quarter at Mortgages for Business. 52% of these were from landlords using limited companies.

Further to this, Mortgages for Business has highlighted that the Index indicates the gap in pricing between the average buy-to-let mortgage rate (3.1%) and the average rate available to limited companies (3.7%) has diminished by two basis points when compared to the first quarter of the year.

Commenting on the findings, Steve Olejnik, managing director of Mortgages for Business said: “The Index points to some good news for landlords, particularly those using limited companies who now have a greater choice of lenders than ever before, to help them finance their rental properties and access to better rates.

“In particular, we’ve seen the options increase at the more specialist end of the market, and we’re delighted that the number of lenders in that space is growing.”

Lenders’ margins over the cost of funds fell slightly to 0.54% from an average of 0.55% in Q1 2019. This does not appear to be a big drop, but it does demonstrate that lenders are having to really squeeze margins to remain competitive. Low loan-to-value products have been better off, with margins falling below the 0.5% mark (0.48%) for the first time since Mortgages for Business began tracking costs and fees in 2013.

This research also shows an increase in the proportion of fee-free and flat fee-based products, up to 20% and 38% respectively, to the detriment of percentage-based fees, which fell to 40% despite having peaked at 48% at the end of 2018.

Mortgages for Business highlights this as a positive outcome for borrowers, who tend to dislike percentage-based fees, and another sign that lenders are vying for business in a challenging market.

Flat lender arrangement fees, sitting at £1,504, saw a drop quarter on quarter, which bodes well for landlords in need of finance.

The full index can be viewed on the Mortgages for Business website.