The range of mortgage deals for holiday let investors continues to expand, with new data from Moneyfactscompare showing an increase in options available.
As of January 2024, there are 445 holiday let mortgage deals on the market, up from 362 in August 2023. This rise comes alongside an increase in lenders offering these products, with 34 lenders, primarily building societies, now catering to this market—up from 32 last year.
Expanding market for holiday let mortgages
According to Rachel Springall, finance expert at Moneyfactscompare, while the broader buy-to-let market has faced challenges due to rising interest rates and changes to tax rules, the holiday let sector has shown resilience. “There has been a notable increase in both the number of holiday let deals and lenders entering this space, offering landlords more options,” Springall explained.
In January 2024, the average fixed rate for a holiday let mortgage stood at 6.20%, a slight reduction from the 7.16% rate seen in August 2023, reflecting some stability in interest rates.
Upcoming tax challenges for holiday let landlords
However, potential challenges loom on the horizon. From April 2025, the tax advantages for furnished holiday lettings will be aligned with those of other property businesses, meaning landlords will lose some of the financial perks they’ve enjoyed. This could impact both existing and prospective investors in the holiday let sector.
Despite these tax changes, Springall believes holiday lets may still be an attractive option. “While the tax changes are a blow, the profitability of holiday lets remains strong, particularly as more people opt for UK holidays due to the uncertainties of international travel,” she noted.
Factors to consider before investing
For those considering entering the holiday let market, Springall advises thorough research. “It’s important for new investors to approach holiday lets with their head, not their heart. Understanding the seasonal demand, the impact of local events, and the potential for seasonal dips is crucial to making a smart investment.”
Holiday lets remain a viable alternative for those seeking to holiday closer to home, as UK breaks continue to appeal to those wary of travel disruptions abroad. However, careful planning is essential to avoid costly pitfalls and ensure profitability.
Key trends in holiday let mortgage market (January 2024)
Number of holiday let mortgage deals: 445 (up from 362 in August 2023)
Lenders offering holiday let deals: 34 (up from 32 in August 2023)
Average fixed rate: 6.20% (down from 7.16% in August 2023)
