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Buy to Let

Number of holiday let mortgages has trebled since 2020

Christina Hoghton
Written By:
Christina Hoghton
Posted:
Updated:
28/01/2022

The rise of the staycation fuelled the popularity of holiday lets, but will it last?

There are now 231 holiday let mortgage deals available, treble that of August 2020 and a rise of 25% since September 2021, according to Moneyfacts.

The financial information provider said that lenders have responded to a rise in demand for mortgages to buy holiday homes to let.

There are now 27 different lenders in this niche sector of the buy-to-let market, two more than in September 2021 and 13 more than in August 2020, the majority of which are currently building societies.

Separate research from Hodge revealed a rise in holiday-let mortgage applications of 173% in 2021 compared to 2020.

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said: “As the desire for a UK vacation rose due to the pandemic, the prospect of earning some extra income through a holiday let has spurred borrowers into action and lenders are catering for this demand.

“While the rise in choice is positive, the market is still relatively niche but could grow further with demand.

“If the demand for a UK holiday in 2022 lessens, consumers may still get a reasonable return on any investment, but it’s vital for them to ensure they are offering a let during a bustling season so they do not miss out on a demand spike.

“There may also be the need to fund upfront costs to get a property at a high standard to let, to entice a larger clientele and to stand above the competition. Should this be the case, borrowers will need to think carefully about what can make them a unique booking, and this will often depend on their location and the time of year.”

Change to rules

The Government recently announced new measures to ensure homeowners letting out a property are not abusing a tax loophole. To qualify for business rates, holiday lets will need to be rented for a minimum of 70 days a year and available to be rented out for 140 days a year under new rules which are to come into force from April 2023, and evidence will need to be shown.

Springall added: “The move is geared to protect genuine holiday lets and crack down on others, so it will be interesting to see how this will affect those considering an investment, but are perhaps not quite confident they can meet the new requirements.”