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Landlords overcharged for limited company buy-to-lets

Buy-to-let investors are being charged more for limited company mortgages even though the lending risk is the same.

Bracknell based specialist lender Foundation Home Loans (FHL) said that some lenders are charging up to 100 basis points (bps) extra for exactly the same product.

It said there is no excuse for this and market forces will quickly force prices down to fairer levels.


FHL announced in December that its own limited company buy-to-let mortgage would be priced at the same rate as its core range.

It claimed to be the first to ensure that landlords were not having to pay a surcharge on the product because of its relative scarcity.

Commercial director Simon Bayley said: “At a time when landlords are under pressure because of tax and stamp duty changes, it cannot be right to expect clients to stump up extra just because of the novelty and lack of choice.”

Bayley said that charging up to 100bps extra above core rates when the risk is no different is effectively asking landlords to pay any tax saving from using a limited liability company structure to the lender instead.

“Fortunately, the intermediary community is far too canny to go on selecting lenders who decide on this kind of pricing model.

“As soon as they realise that there are lenders who are not in the market to take short term advantage of landlords keen to minimise their tax exposure, then I am sure that market forces will dictate that this kind of overpricing will quickly disappear.

“It certainly will not win any friends among advisers and their landlord clients in the long term.”

  • Commercial Trust

    Since the end of December (just over three weeks), the number of mortgages available to limited companies shown by our buy to let tracking system has increased from 70 to 128 (not including commercial lenders). That's an increase of 83%. The average interest rate for limited company products is 4.64%, compared to 3.80% for other products.

    It is inevitable that competition will close this gap further. Whether limited companies will become the preferred method for investing remains to be seen, but I have no doubt that the options available to companies will become much more competitive in the near future.


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