How intermediaries can better support limited company landlords

The fact that 2023 saw a record number of buy-to-let companies being set up is likely to come as no surprise to intermediary firms who have had any landlord interaction over the past few years. But it remains a significant fact.

The pros and cons attached to a limited company offering have been covered many, many times throughout our esteemed trade press. However, from an advice perspective, it remains crucial that intermediaries don’t just assume their landlord clients are as well-versed as they could, and possibly should, be on what is a weighty decision.

In a similar vein, although limited company offerings have been brought far more in line with the ‘standard’ buy-to-let offerings of old, differing attitudes and approaches are still evident across the lending community. As such, advisers need to be aware of specialist attitudes from a product, criteria, underwriting and service standpoint. After all, adopting a one-size-fits-all approach simply doesn’t work in what remains a complex sector.

Looking back on 2023, despite fewer landlord purchases, this record number of 50,004 buy-to-let companies being incorporated – as calculated in the Hamptons Monthly Lettings Index for December – easily surpassed the previous record of 48,520 established in 2022.

Delving a little deeper into this, the Index highlighted that buy-to-let companies now own a total of 615,077 properties in the UK, an 82% increase since the end of 2016, when a raft of tax changes and regulatory measures were first announced. The rising number of incorporations means that, at the start of 2024, there were 345,426 active limited companies designed to hold buy-to-let property in the UK, up 11.6% from 309,643 at the beginning of 2023.

Of the 615,077 limited company buy-to-let properties, 458,838 (75%) were suggested to have a mortgage charge against them. The number of outstanding limited company mortgages has risen 10% over the last 12 months, despite the total number of buy-to-let mortgages falling 3% over the same period. Meaning that limited company landlords are more likely to have a mortgage than investors who own buy-to-let property in their personal name.

Companies owning 20+ homes were the only ones to see the number of mortgage charges increase faster than the number of homes, suggesting that these investors are leveraging up rather than reducing the debt on their portfolio.

Increased lending competition amidst some relatively stable economic conditions has already resulted in a raft of rate cuts kick off the new buy-to-let year with a bang. Nevertheless, with headline rates still significantly higher than many landlords had previously secured and a huge number of product maturities in the pipeline, there’s a rising likelihood that the number of properties being placed within a company structure will continue to rise.

It was also interesting to see that most of the growth in buy-to-let incorporations over the last year come from smaller landlords. Over the last 12 months, there was said to be a 21.9% increase in the number of homes held in companies with a single property, compared to a 3.8% increase in the number held by companies owning 20+ homes.

When looking at the future of buy-to-let, this represents a hugely encouraging trend as it paints the picture of a longer-term commitment from a landlord base which was largely expected to exit the market altogether. And is yet another healthy signpost to the resilience on show across the sector over the past 18 months, as well as its ability to create opportunities for landlords and intermediaries who remain best placed, and best advised, to maximise them.