Mortgage market and holiday lets/second homes

'Clamping down' on holiday lets is the epitome of tinkering around the edges without doing anything about the problem. The problem is that we do not build enough houses in the UK to keep up with demand and seem to lack the political will to do much about it. I just wonder whose fault it will be next time that it totally isn't failure of government policy. Saying that, post COVID we have seen increased demand for holiday let applications and lenders coming out with offerings to meet that demand but the reality is, it's probably a sign of the times. The worlds biggest hotel business is Air BnB for a reason and I'd still expect to see further growth in the sector yet. And it's a distinctly grey area. Tourists bring money and jobs into an area which we all probably think is a good thing and want more of, but you still need houses for the locals.

The North Norfolk coast remains a prime area for holiday lets and second homes and has continued to grow since the lockdowns where many people have chosen to holiday within the UK instead of travelling abroad. That said, heading into a recession with many people having less disposable income, these holiday lets could see longer gaps between bookings due to families not having the money to spend and could lead to lenders considering how they assess the viability of a holiday let mortgage.

We've seen more and more lenders come into the holiday property space recently. The sector has stayed buoyant with many owners expecting a continued trend in UK holiday days due to the cost savings versus going abroad. Speaking to our clients, the majority of holiday let owners welcome sensible regulation. Most are proud of the service they provide to holidaymakers and naturally want any cowboys removed from the space. Crucially, any regulation needs the longer-term and wider consequences thought through. Too often we've seen knee-jerk reactions when it comes to housing market regulation, so let's hope ministers understand that holiday accommodation is an important fabric of the UK and fully think through any proposed changes so that they enhance, rather than destroy, the sector.

Morning Anna, Have you seen a continued increase in second home/holiday let applications since the pandemic? Second home applications we have seen reduce over the last few months, we have actually seen some of our clients selling second homes that are coming up for remortgage, £1m of borrowing interest only at 1.5% interest is £1,250 per month, £1m of borrowing interest only at 4.75% is £3,960 per month so increased cost there plus increased energy costs running that home make it a lot less attractive. Holiday let properties still prove fairly popular as they are still seen as a good investment, but i have had some landlords start to worry about oversaturation of airbnbs in some areas What is the lending landscape like currently? Do you expect more lenders to enter or leave the sector or stay stable? What is lender criteria/submitting applications like? It is fairly stable in this area, second homes generally are stressed on a full affordability basis where holiday homes are stressed on the high, med and low rental income projections for a property. If regulations are put in place this could well change the lending landscape, lenders may require a licence be obtained on the property prior to mortgage completion like with certain HMOs Third query answered above too, happy to expand

Our views and ability to go on holiday changed during covid which led to an increase in people taking trips into the UK, which in turn saw an increase in holiday lets and second homes.

We worked with a new build company in Bournemouth building 2 new blocks of flats over the covid period and around 30% of these were sold as 2nd homes.

The Government has already made it less tax efficient and more expensive to buy a BLT, holiday let and 2nd Home, and with now interest rises this has seen this market dramatically slow. The government with its actions over the past few years has made it clear they don't want us to own more than 1 home and with more legislation is just another way of illustrating that, this will no doubt have a knock-on effect to people decisions whether to buy or not to buy.

We have also seen an increase in lenders offering holiday let products which had previously been dominated by the building societies. Since March 2020, the number of lenders now offering the niche holiday let mortgages has risen to 31 (data from Moneyfacts). Enquiries for holiday let mortgages have increased steadily since the pandemic which has been a direct result of the increased demand from UK holiday makers. Before the pandemic applications were typically made by borrowers who thought about buying a property near the coast or tourist destination and perhaps use it for their own holidays throughout the year.

With the increased demand for UK stay cations Investors have seen the benefits and potential profits of this business model but now also have a huge choice of mortgage products.

Since the pandemic, landlords have been wary of the fact that the gov could ask them to stop receiving rent and allow the tenants to stay. Holiday lets rule this out.
Plus with the way travel anxiety has increased due to 2020, UK holidays are rising astronomically fast.
I can see it being short term though because humans as a species have a short memory and will get back to flying overseas again for their hols. I'm part of that crowd I admit!
As for second homes, some people like to be able to holiday in a certain point of the UK without the need to book a place or wait for seasons. If it's viable and you won't get bored of the same place, why not. Again though, increased since 2020.
Lenders have been refining the HL product now, to ensure easy transactions.