Wider choice of mortgages for holiday let investors

Record demand for UK-based holidays is attracting investors to the holiday lettings market.

If you're thinking of investing in a holiday property, the good news is that there's a growing number of mortgage options to choose from.

Financial data provider Moneyfacts found that over the past six months, four more lenders have started offering holiday let mortgage deals, up from 21 lenders in April to 25 lenders this month. Over the same period, the number of holiday let mortgage deals has increased from 149 to 186.

It comes as travel restrictions and testing requirements deterred many people from booking a foreign holiday this year, leading to a boom in UK holiday bookings.

"It's positive to see a rise in holiday let product choice for landlords over the past few months, but the market is still relatively niche as there are less than 200 deals available," said Rachel Springall, finance expert at Moneyfacts.

"As the demand for staycations remains evident, it would not be too surprising to see more growth in this market in the months to come. In August 2020 only 14 lenders were offering a buy-to-let mortgage available to holiday let, whereas today there are 25 and many of these are building societies."

Separate findings from commercial property adviser Altus Group reveal that owners of more than 11,000 second homes in England have "flipped" their properties to become holiday lets since the start of the pandemic in order to capitalise on the growing market.

According to an analysis of government data, there are now 67,578 homes in England classified as holiday homes which have become "commercial" premises, up by more than a fifth from 56,102 at the start of the pandemic.

And UK holiday operators say there is no sign of a slowdown in bookings. In fact, holidaymakers are booking early for next year in order to secure their preferred property.

Alex Wilson, co-founder of Host Unusual, a website that offers distinctive holiday locations, told the Guardian that many people have adapted their booking behaviour as they realise they need to reserve earlier to get the most sought-after accommodation, especially in the case of single-unit properties.

Landlords are taking advantage of the opportunity to earn an income through holiday lets, Springall said.

"Those who may have saved some additional disposable income during the UK lockdown, or are looking for alternative investment opportunities, may then be keen to get involved," she added.

"Undertaking thorough research into popular locations, weighing up tax benefits, reading up on rules regarding residency periods and other potential expenses outside of utility bills can feel daunting, so seeking advice before entering an arrangement is wise."