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Mortgages for holiday let / second home market

Journalist: Emma Simon, Mortgage Strategy

ended 17. February 2023

I'm looking for comments for an article on the holiday let / second home sector for Mortgage Strategy magazine. The feature look at some of the following areas -  any other broker/ lender comment would be appreciated. 

Is the holiday let sector appearing more resilient than the residential or traditional buy- to-let sector?  

Are buyers more cautious than we've seen in recent years? Could there be an influx of properties on the market this year, as potential sellers look to get out before prices fall / or they need to refinance on higher rates. Or are most owner borrowers in a position to weather current economic difficuities?

Are traditional buy-to-let landlords looking at the holiday let market? Is this being driven by tax changes in the BTL sector? 

Are second home owners increasingly looking at holiday lets/ Air BnB for their property, with mortgage interest costs (and general cost of living) rising substantially? Is this driving mortgage demand, ie are homeowners/ borrowers looking to remortgage to different types of mortgage deal to accommodate this? 

Are more mortgage lenders now offering specialist holiday let products? Do these look good value? 

Are there any particular regions that are holding up better or conversely likely to be worst hit?  Presume as ever it is the prime regions (Cornwall etc) that will be less affected by market changes. 

Ideally I'd be looking for comment by the end of this week (Friday 17th). Any comments from mortgage brokers, lenders or estate agents would be appreciated.  

Many thanks

 

Emma Simon 

 

5 responses from the Newspage community

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Sam Norris
Managing Director at Grand Union Finance
We have seen a huge uplift in the number of enquiries from our investor clients who are looking to diversify their portfolios with properties they can rent on a short-term basis. The mortgage market, unfortunately, is not quite keeping up with the demand. That being said, there are more lenders adding more products to the market all the time, and we are finding that competition is growing. The change to a simpler rental calculator working off a property's potential AST rent, as opposed to the more traditional high, medium and low season rates we were accustomed to previously, has helped massively with being able to make recommendations quicker to clients, which is what we want to be able to do as brokers.
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Benjamin Blyth
Director at Houz Mortgages
2022 for my cottage on Airbnb was as an exceptional year for bookings, even through winter, suggesting 'staycations' will continue to be popular in this cost-of-living crisis and make holiday let investments viable. This market does seem to have been more resilient than BTL mainly due to holiday let income being higher than typical AST rents, and so almost always meets lender requirements. That said, there may be trouble ahead: my own rate is due to go from sub 4% to >6% when I renew and energy costs have skyrocketed. This 50% increase simply has to be absorbed by a higher nightly rate, which may slow bookings. For some, it may mean selling up. There's also opportunity for resi owners with space and the right lender to benefit from tax-free Rent-a-Room income. This is an opportunity for the few lenders that understand and accept Airbnb.
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Joe Stallard
Director and Advisor at House and Holiday Home Mortgages
The holiday let market has been consistently strong since the Covid pandemic. With the recent rise in interest rates really crippling buy-to-let affordability, this strength has continued due to holiday lets' typical high seasonal rental values helping investors get the borrowing levels they need. We’ve seen more lenders enter the space in recent months. The sector has also become better understood and more attractive to professional investors, and these lenders will need their proposition development to continue to match their needs. We’re seeing investors starting to explore city-based properties and areas that can attract holiday-makers all year round. Seaside locations remain strong, but areas that don’t require sunshine are proving more and more popular.
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Matthew Jackson
Director at Mint FS
Across the board we are seeing investors look more closely at the holiday let market - and we are even assisting first time landlords purchase holiday let homes.

With so many challenges for traditional buy to let investment such as the increased stress testing and portfolio assessments - holiday lets offer huge flexibility , and a potentially great return.

When you add in the ability with some lenders to offer both holiday let and Air BNB usage as well as the owner being able to use the property as a holiday home this is a great option at the moment for a lot of our clients.

The rental assessment which is based on an average of low , medium and high seasons means both no issues with potential stress testing and a much higher yield for clients - where is the downside?
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Alastair Hoyne
CEO, Finanze Capital at Finanze Capital
I think both the holiday let and traditional buy to let sector have been resilient with rental demand very high in both and still growing. Buyers have been more cautious with going onto fixed rates as rates were rising so quickly in Q4 2022 and have since dropped again, I see buyers holding out for another month or 2 to see if rates continue to drop before they go onto fixed rates again. Borrowers have been able to weather the storm and due to the equity thy have built up in their properties and the increase in rental demand and therefore them being able to charge higher rates I do not see landlords wanting to sell at this time. Lots of lenders now allow BTL properties to be let on an AirBNB basis and due to this being so lucrative its becoming very popular.