Almost half of mortgage brokers (49%) have said that they expect the volume of buy-to-let portfolio limited company lending they write to increase over the next 12 months, Paragon Bank has revealed.

Research conducted by BVA BDRC for Paragon’s Mortgage Intermediary Insight Report (MIIR), has also found that 38% are anticipating more non-portfolio limited company business.

Furthermore, just 14% of brokers that took part in the research said that they expect more personal name portfolio business in the next 12 months, with 6% expecting growth in personal name non-portfolio buy-to-let lending.

The research by BVA BDRC 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, as a result of favourable tax treatment of incorporated businesses.

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

Paragon Bank’s commercial director of mortgages, Louisa Sedgwick, 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.

“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.”

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