What to know about the holiday let market

This article is part of
Guide to unusual buy-to-let

What to know about the holiday let market

Holiday season in the UK is well underway, with many families and couples choosing to book an apartment or holiday cottage in Britain, rather than overseas.

‘Staycations’, as they are known, have become increasingly popular – this year, the UK’s exceptionally hot summer months meant many did not feel they had to go abroad to enjoy sunnier climes.

Meanwhile, the decline in sterling’s value following the vote to leave the EU, has seen many people decide not to risk losing out by exchanging their hard-earned pounds for euros or US dollars at the airport.

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Finally, there are plenty of holiday lets in the UK that now cater to all needs and offer luxury holidays without having to venture far from home.

Advisers’ clients may well see the appeal in holiday lets as another avenue of income, having witnessed the popularity of holidaying at home.

According to VisitBritain, there was a 5.8 per cent rise in domestic holidays in the UK in 2017. 

The Sykes Staycation Index 2018, which reviews the holiday let and staycation market in the UK reports that in 2017 56 per cent of all adults "staycationed", and that 74 per cent planned to do so in 2018.

But typically getting a mortgage on a holiday let has been a more specialist area for lenders.

Niche area

Danny Belton, head of lender relationships at Legal & General Mortgage Club, observes: “In recent years we have seen an increase in the number of lenders offering products in the holiday buy-to-let (BTL) sector, namely regional building societies and specialist BTL lenders, as it is quite a niche area of the market.”

Guy Nyirenda, a partner at Coreco, has noticed a similar trend, and acknowledges lenders are always looking at niche areas to enter in the “overcrowded” BTL market.

“The availability of holiday let mortgages has been steadily increasing in the past few years,” he explains. 

“Historically, these have only been offered by building societies, but recently more specialist BTL lenders have stepped into the market, which has increased competition and provided better mortgage product choice.”

One of these is Mansfield Building Society, which in July this year announced it has added a holiday BTL offer to its mortgage range.

Its holiday let offering provides loans up to 70 per cent loan-to-value (LTV) and, most notably, allows holiday let landlords to personally occupy the property for up to 60 days a year.

Typically, most holiday let mortgages do not allow for personal use.

Mike Taylor, head of products and savings at Mansfield BS, notes: “There is increasing competition in the holiday BTL market, with a number of new market entrants who are offering increased choice to potential landlords and innovation in the criteria applied.”

But Karen Bennett, managing director of commercial mortgages at Shawbrook Bank, suggests although there are some lenders in the market, servicing particular niches, the holiday let market is “badly underserved”.