Boom in demand for holiday lets

Growing numbers of property investors are looking to buy holiday homes to let out in the UK in response to increasing demand for UK holidays.

Ongoing economic uncertainty combined with the fall in the value of the pound has meant many people plan to holiday at home this year rather than travel abroad. According to research by hospitality jobs site Caterer.com, 70% of people intend to take a staycation in the UK in 2020, adding £27 billion to the economy. The research found that that the Lake District is the preferred location for a UK break this year, followed by Cornwall, Edinburgh and the Peak District.

Separate analysis by specialist lender Cambridge & Counties Bank reveals that more than eight in 10 (85%) of mortgage brokers expect to see greater demand for mortgages to support the purchase of holiday lettings properties over the next 12 months. Of these, nearly one in three (29%) expect to see a “significant” rise.

Simon Lindley, chief development officer at Cambridge & Counties Bank said: “The UK is very likely to become a much more attractive holiday destination and one result is an expected boom in demand for quality UK holiday lets.”

Tax advantages of holiday lets

Another reason holiday homes appeal to property investors is that their tax treatment is more favourable than standard Buy to Let properties. Tax relief on mortgage interest has gradually been reduced on Buy to Let properties, so that from April it will only be available at the basic rate of tax.

Furnished holiday lets, however, are treated as a business, which means they can continue to benefit from tax relief on mortgage interest.

Consider the downsides

Although holiday lets have plenty of benefits, its worth remembering that although demand for holiday homes may be high during the summer months, there may be long periods when properties aren’t let out.

If you’re considering purchasing a holiday home, you’ll therefore need a cash buffer in place so that you can cover mortgage payments when your property is sitting empty.

There can also be a lot more paperwork and maintenance involved with holiday homes. For example, the property will need to be cleaned every time guests leave, so unless you live nearby and are prepared to do this yourself, you’ll need to pay someone to do this for you.

Getting a mortgage for a holiday let

It may also be harder to get a mortgage for a holiday home than for a standard Buy to Let property as some lenders restrict Buy to Let mortgages to properties which are let on assured shorthold tenancies (ASTs) of between 6 and 12 months, or where there are longer agreements in place.

Smaller building societies which tend to take a more flexible approach to underwriting are often more willing to lend on holiday lets than larger high street providers. For example, lenders that will look at holiday lets include Leeds Building Society, Principality Building Society, Tipton Building Society and Mansfield Building Society.

Bear in mind that when you apply for a holiday let mortgage, lenders will want to see how much income overall the property is likely to generate each year.

If you’re not sure which lenders might be able to help you, or which holiday let mortgage deals you may be eligible for, take a look at our holiday let mortgage page for more details.