Nearly half of mortgage brokers expect the volume of buy-to-let portfolio limited company lending they write to increase in the next 12 months, research undertaken by Paragon Bank has revealed.

The research showed 49% of intermediaries expect to place a higher volume of buy-to-let mortgages written to portfolio landlords operating through limited companies over the period, with a further 38% anticipating more non-portfolio limited company business.

Just 14% of brokers expect more personal name portfolio business in the period, with just 6% expecting growth in personal name non-portfolio buy-to-let lending. 

The research, undertaken by BVA BDRC for Paragon’s Mortgage Intermediary Insight Report (MIIR), found that mortgages written to portfolio landlords operating through limited companies currently account for just under a quarter (24%) of cases placed but brokers predict this to rise due to the favourable tax treatment of incorporated businesses.

A separate BVA BDRC survey of landlords covering the first quarter of this year showed also that 62% of those intending to expand their portfolios plan to purchase properties within a limited company structure, up from 43% in Q3 2021.

Louisa Sedgwick, Paragon Bank Commercial Director of Mortgages, said: “With such a strong emphasis on the specialist section of the market, lending to landlords operating as limited companies has long been one of Paragon’s strengths and we’ve seen an increase in this type of business in recent years.

“Owning properties through limited company structures can be more tax efficient because of the ability for investors to offset finance costs, such as mortgage interest, against rental income. In addition, those applying for mortgages through limited companies are often stressed at 125%, compared to the 145% that landlords applying as individuals are subject to.”

She added: “While limited company structures may not be the best option for every landlord and we’d always recommend seeking professional, independent advice, these advantages are becoming even more evident in the current market where the unsettled economy has made it necessary for lenders to tighten up stress testing. This is why I think the brokers we spoke to have got it spot on and we’ll continue to see a shift towards more limited company lending.”

Further Paragon research found that a profitable full-time income is made by 43% of landlords whose portfolios are owned within a limited company structure, compared to 26% amongst investors who hold properties in their personal names.

For media enquiries contact:

Jordan Lott
Media Relations Manager
Paragonwww.paragonbank.co.uk 

Notes to editors:

BVA BDRC surveyed 683 landlords during March and April 2023 and 247 mortgage intermediaries in May 2023 on behalf of Paragon Bank.

Paragon lends to private individuals and limited companies and provides mortgages suitable for single, self-contained properties, as well as HMOs and multi-unit blocks. Paragon can accommodate higher aggregate lending limits and more complex letting arrangements including local authority leases and corporate leases along with standard ASTs.

Paragon Bank PLC a subsidiary of the Paragon Banking Group PLC which is a FTSE 250 company based in Solihull in the West Midlands. Established in 1985, Paragon Banking Group PLC has over £14 billion of assets under management, helping more than 340,000 customers to achieve their ambitions.