A recent report by lender Kent Reliance has stated that a number of Landlords are incorporating as a way of getting around the mortgage interest relief changes. The report also states that it is likely that tenants will bear the brunt of the hike in stamp duty.
The report “Buy to Let Britain” shows that, up to the first quarter of this year, four in ten applications for buy to let mortgages have been from limited companies. This figure is expected to rise to more than half by the end of the year. In 2015 a fifth of applications were from limited companies while in 2014 it was only 15%.
The entire market showed that just under 38,000 loans were issued to limited companies which is nearly four times the figure compared to a year ago.
Going down the limited company route sadly does still mean that the extra stamp duty surcharge has to be paid but it does mean that mortgage interest relief can still be claimed.
The report showed that landlords with portfolios of 20 or more are the most likely to incorporate and that a third of Landlords surveyed said they were considering it with 7% having already done so.
A survey of 1097 Landlords showed that 39% expect to increase their rents over the next 6 months with 75% of them blaming the changes to mortgage tax relief forcing them down this route.
Whilst a high percentage say that the changes will affect their investments an encouraging 71% still believe property investment to still be better than other investments.
The report also estimates that the private rental sector will grow from 5.1m to 5.3m by the end of this year, further increasing to 5.6m by the end of 2017.
Andy Golding, chief executive of Kent Reliance, said: “Driven by a political agenda that prioritises home ownership and a view that buy-to-let is harmful to the UK’s housing market, property investors are seen as the scapegoats for the nation’s housing issues, whilst regulators are turning their attention to the lenders that support the market.
“This constant focus on managing demand does nothing to address the real issue, which remains the lack of supply of new housing.
“However, notwithstanding the various initiatives aimed at curbing buy-to-let, the reality is that the market, and the PRS that it supports, are essential parts of our housing supply.
“It is unfortunate that this is not acknowledged by policy makers, whose actions will primarily affect the tenants who they are arguably aiming to support: the prospect of higher tax on buy-to-let is already pushing up rents.