Landlords seeking mortgages to benefit from holiday market rental yields

Getting a mortgage for a short-term rental or holiday let now even easier

Holiday let mortgages may once have been tricky to come by, but more lenders are getting into the fold. Investors on the fence about short-term let investment could now have more reason to take the plunge.

The number of buy-to-let mortgage products available to those looking at holiday lets has more than doubled since August 2020. If you’re looking into funding your short-term or holiday let investment, there are now 186 different products on the shelf, compared to only 74 this time last year.

And there are also more lenders than ever to choose from, with 25 mortgage companies now offering products. Last August, there were just 14 in the arena, showing how appetite is growing for this market niche.

Research published by Moneyfacts shows that the average fixed rate holiday let mortgage last month was at 4.14%. This is up from 3.53% in August last year, but the sector is still attracting massive interest from investors.

Still relatively niche

According to Rachel Springall, finance expert at Moneyfacts, we could expect to see a bigger rise in this side of the mortgage market.

“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,” comments Springall. “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.”

Hamptons International has also reported a major rise in the number of holiday let incorporations so far this year. They saw 1,404 between January and June, the highest number since records began and an increase of 119% since 2019.

Springall adds: “Whether the appetite for staycations falls into 2022 is unknown but for the moment it’s evident landlords are taking advantage of the opportunity to earn an income through holiday lets.”

“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.”

Appetite for staycations: is it just the Covid effect?

A big driver behind the rise in interest in UK holiday lets is the surge in the ‘staycation’. This trend has been going strong since 2020 as a direct result of travel restrictions due to Covid.

However, staycations are much more than just a recent fad. As the world at large has become more environmentally aware in recent years, many are opting to fly less to reduce their carbon footprint. This, too, plays a major role in the shift away from holidays abroad. As the likes of Airbnb and other short-term let options outside the traditional hotel model have also become more popular, this has opened the area up as a major investment class.

It is therefore likely that even once travel abroad picks up, more people than ever will want to stay local.

From an investment perspective, there are many benefits to short-term and holiday lets. Annual returns can far surpass traditional buy-to-let income, and the investment falls under different tax rules. You can read more about this here.

At BuyAssociation, alongside our traditional buy-to-let investment opportunities, we have options available on a short-term let basis. Take a look at our investments page and sign up for free for more information.

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