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Growing number of mortgage deals available for holiday let investors

With the rise in UK staycations, there has been an increase in property investors entering the short-term rental sector. To keep up with demand from holiday let investors, lenders are offering more mortgage deals in this market.

During the past six months, four new lenders started offering mortgage deals to holiday let investors, according to data from Moneyfacts. The figure is up from 21 lenders in April 2021 to 25 lenders at the start of September. Additionally, the number of deals available increased from 149 to 186 in the same period.

This is welcome news for investors entering or expanding their portfolio in the short-term holiday let sector. Many are looking to capitalise on the rise of UK staycations as international travel remains uncertain.

Mortgage applications for holiday lets have also been soaring this year. In the coming months, lenders will likely further expand their mortgage offerings to meet this increasing demand in the short-term holiday let sector.

Rachel Springall, finance expert at Moneyfacts, comments: “It’s positive to see a rise in holiday let product choice for landlords over the past few months, but the market is still relatively niche as there are less than 200 deals available.

“As the demand for staycations remains evident, it would not be too surprising to see more growth in this market in the months to come. In August 2020 only 14 lenders were offering a buy-to-let mortgage available to holiday let, whereas today there are 25 and many of these are building societies.”

Investing in holiday lets

In the past 18 months, holiday lets have become increasingly popular among holiday-makers. And this trend was picking up pace even before the COVID-19 pandemic. Some investors are using holiday lets as a way to diversify their portfolio or their main type of property investment.

During the first six months of 2021, there was also a record number of holiday let incorporations, according to research by Hamptons. This further shows that more investors are seeing the benefits of investing in the sector. And many are also professionalising their holiday let business.

Considerations to make

Before investing in short-term holiday lets, there are a number of considerations to make. Factor in the additional costs, risk and work involved. Additionally, when considering buying a property for short-term rental, ensure you are able to legally do so. Check how you need to get that permission if it’s necessary.

At the same time, there are a number of benefits that come with investing in holiday lets. This includes tax benefits. And there is the potential to earn higher rental yields, particularly if you pick the right location.

“Those who may have saved some additional disposable income during the UK lockdown, or are looking for alternative investment opportunities, may then be keen to get involved,” Rachel Springall says.

“Undertaking thorough research into popular locations, weighing up tax benefits, reading up on rules regarding residency periods and other potential expenses outside of utility bills can feel daunting, so seeking advice before entering an arrangement is wise.”

This kind of investment may not be for every landlord. However, it comes with a few major advantages that are likely attractive to many investors. Do your research, and seek out professional advice to find out if this is the right investment for you.

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