Short-term holiday let boom as more lenders open up mortgage options


Staycations are on the rise, and mortgage lenders are expanding their offerings to meet the demand. Should property investors and landlords be thinking about branching into short-term holiday lets now?

Even before the coronavirus outbreak, which put a halt to overseas travel plans, the UK holiday market was thriving. While more Brits were booking staycations as well as foreign holidays, travellers from overseas were taking advantage of the falling pound and booking more stays in the UK.

On a consumer level, environmental issues have become more prominent in recent years. One survey last year by Skye Holiday Cottages found that 33% of people want to be greener. A further 20% of people said they intended to book “more sustainable” holidays in the future.

From a property investment perspective, there are many factors that increasingly attract landlords looking to diversify. While long-term rentals are still a strong market, short-term lets carry certain financial and tax benefits. Along with increasing demand for short-term and holiday lets, it is becoming a more attractive business model.

The current situation – more mortgages, more options

Although overseas travel is once again an option in the wake of the COVID-19 outbreak, the demand for staycations is still likely to rise. Many people remain reluctant to holiday abroad, and are looking for a closer, cheaper alternative. This is likely to remain the case for some time.

As such, mortgage lenders are filling what was once a gap in the market for borrowers. The number of options available to those wanting to offer short-term holiday lets on a mortgaged property is growing.

YBS Commercial Mortgages is now offering a limited company buy-to-let product. It is targeted primarily at holiday lets in prime UK tourist locations. With a maximum loan amount of £1m, the product offers a five-year fixed rate at 3.85% with a maximum LTV of 75%.

Allan Griffiths, regional director at YBS Commercial Mortgages, said: “We know the UK tourism industry has been badly affected by the coronavirus pandemic and subsequent lockdown, but as restrictions ease, staycations are soaring in popularity.”

Teachers Building Society has also launched some new products for the market. The lender is offering a 3.49% three-year fixed rate, and a 3.74% five-year fixed rate. Both are for borrowers with 75% LTV. The products will support demand from both new and existing property investors in light of recent market growth.

Ralph Punter, business development manager at Teachers for Intermediaries, said: “As our own research has shown, consumer demand for UK based holidays has increased as a direct result of the pandemic, a trend we expect to continue into next year too.

“Combined with the recently announced stamp duty holiday, we expect to see increased interest in the holiday let market from investors.”

Top short-term let location might surprise you

Property investors and landlords looking to diversify into holiday lets will need to think about location. As well as the property itself, an ideal location will make the best returns.

While many may assume that coastal resorts are the best place to look, actually steering clear of seasonal areas can also be a good option. Although the summer months will see extremely high demand and high prices in traditional “tourist areas”, winter might be a different story.

Perhaps surprisingly, the UK location with the highest short-term let yields is actually Liverpool. According to research by Portico Host, landlords in Liverpool make an average 27.2% in rental returns. The data also found that Manchester was a top spot for high yields for holiday lets.

Such city locations are likely to be busy all year round, as they attract business travellers as well as tourists. Rachel Dickman, regional manager at Portico Host, said: “These places typically have excellent transport links, proximity to popular tourist attractions, employment hubs, and good restaurants and cafes.”

She added that Liverpool in particular receives growing numbers of tourists each year. Around 1.34 million people visited the city in 2018, including business travellers, students and young professionals. It also hosts and attracts major sporting and leisure events, which attract thousands of extra people.

“The increased demand for this type of accommodation is underpinning the rents that can be achieved,” Rachel added.

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Short-term holiday let boom as more lenders open up mortgage options


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