Rising demand for short-term lets; but banks are behind the times


Banks have been slow to respond to the growing demand from borrowers who want to rent out their property as a short-term let. The rapid rise of Airbnb, as more people opt for ‘staycations’, and the move towards the popular concept of a sharing economy by many seems to have left mainstream lenders unable to meet borrower’s needs.

One of the few lenders permitting short-term rentals is Metro Bank, which is calling on all lenders to catch up with customer needs and allow them to let their properties for a few days or weeks at a time. The big six lenders – Barclays, HSBC, Lloyds, Nationwide, RBS and Santander – do not permit short-term lets on any of their buy-to-let products. On residential mortgages, Barclays, HSBC and RBS explicitly rule it out as an option, while Lloyds, Nationwide and Santander may permit it with strings attached.

Traditionally, lenders have not supported holiday lets because the level of risk is too high. The chance of damage to a property increases significantly if more people have access to it. Coupled with the possibility that a property is also left empty for extended periods, then it is unsurprising that the risk is perceived to be too great for mortgage lenders.

Booming holiday let market

In recent years, the UK holiday let market has been booming. According to Visit England, the number of people booking self-catering holidays in England increased by just over a million to 7.23 million between 2015 and 2017.  Housing website Inside Airbnb reports that London listings for Airbnb have increased five-fold over the past four years, and in Edinburgh, they have doubled since 2016.

Mainstream lenders left behind

Despite the reluctance of the mainstream high-street banks to respond to customer demand, some lenders recognise the opportunity. Metro Bank is the biggest name in the short-term letting market, allowing residential homeowners to let their property for up to 90 days as a holiday let, although this isn’t available on its buy-to-let range.

“The past few years have seen an increase in the number of lenders offering holiday BTL mortgages,” says Commercial Trust chief executive, Andrew Turner, plus mortgage brokers are reporting that the number of lenders offering holiday let mortgages, while still small, is slowly increasing.

Holiday lettings lender Leeds Building Society reported a 19% rise in applications for holiday let finance in the first six months of this year compared to the same period in 2017. Other lenders that permit holiday lets include Bath, Cumberland, Furness, Harpenden, Leeds and Tipton and Coseley Building Societies; and Scottish Building Society joined the ranks when it launched a new mortgage product that allows holiday lets in August.

Head of business development and sales strategy Paul Alexander, Scottish Building Society, says: “We have seen massive growth in the number of properties let as holiday accommodation through sites such as Airbnb.

“Brokers have told us there is a demand for a product designed to meet the needs of this developing market.”

Consequences for homeowners flouting mortgage contract

However, with the surging popularity of short-term lets to make some extra cash, some homeowners may be flouting their lender’s rules without realising they need to notify their lender. If you are letting your home without explicit consent from your mortgage provider, then you are in breach of contract and could face some serious financial consequences.

A lender could increase your rates, issue a credit file black mark or even ask for immediate repayment of your loan. The message is if you want to short-term let your property, check your mortgage terms and conditions first, and if your existing lender doesn’t support short-term lets, find one that does.

It’s time for banks to move with the times

There is no doubt that short-term property letting has a significant role to play in the UK’s thriving sharing economy, one where you don’t have to own because you can borrow, and it’s about time lenders caught up with their customers.

According to Paul Riseborough, Metro Bank chief commercial officer, “The sharing economy is a fact of life. Banks face a choice: to support customers in the choices they make or risk losing them.

“It’s about responding to what customers tell us they want – and that’s flexibility and choice in how they use their homes. Now the banking industry needs to move with the times and react to that.”

Highgrove Mews

High Net Yield Freehold Houses

  • Commutable to London (27 mins to central Paddington station)
  • Rental demand extremely strong with large industry presence in Reading
  • Freehold with 4% net yield

£284,955 - £457,000

St Petersgate – Stockport Manchester

New Launch - Stockport Manchester, apartments from £160,000

  • Discounted launch prices from £160,000
  • Excellent transport links with 3 trains per hour to London Euston and only 9 mins journey to Manchester Piccadilly
  • Experienced development team

Assured Rent Housing Association Leases

Assured Rent Housing Association Leases

  • Assured rent & no rental voids
  • Tenant damage cover & newly refurbished inline with requirements of a corporate sitting tenant
  • Free property and lettings management

From £62,000

Emerging Birmingham Commuter Town With Properties From Just £104,000

The emerging Birmingham commuter town where properties are selling in an average of just 24 days

  • A collection of 62 two bedroom apartments and 28 one bedroom apartments.
  • DE14 is one of the fastest selling postcodes in the West Midlands.
  • 23 minute train journey into Birmingham New Street Station.

Properties from £104,000

Mill, Stockport

The Northwest's emerging property hotspot

  • Discounted off-plan 2-bed prices from £162,000
  • Completion date - Q4 2021
  • Rental yields - 6% plus

Discounted off-plan 2-bed prices from £162,000

South Central – Birmingham City Centre Apartments

Highly anticipated 28 storey launch in Birmingham City Centre with an impressive roof garden and communal facilities.

  • 154 units across 28 storeys
  • Residential multi-media community room, gym, roof garden and sky cinema
  • Excellent future connectivity via the metro system to other key transport hubs and locations around the city

from £205,800


Talk to us

Speak to our UK property experts today: 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

+852 9865 4446

Open from 9am-6pm HKT

Stamp Duty Calculator


Unlock members only investment opportunities and full development details. Join now – it’s free, quick and easy.


Not a member? Sign up for free

Airbnb short term let

Rising demand for short-term lets; but banks are behind the times


By submitting your details via this online form you agree to be contacted via email/phone/SMS by Direct Marketplace Ltd t/a BuyAssociation in relation to property investment and property developments . We do not share your personal details with third parties.  To view our full Privacy Policy click here.