The explosion of Airbnb and similar sites enabling landlords to diversify how they make income from their investment properties is forcing change within the buy-to-let mortgage market.
A landlord seeking to maximise their financial returns by switching their income model from traditional assured short-hold tenancy (AST) agreement to holiday rentals will inevitably be required to remortgage by their lender before they can change the ‘use’ of their rental property.
According to research by BDRC, 9% of landlords with more than 20 properties own UK holiday lets, and holiday lets were the second most popular property type to own alongside residential portfolios.
Holiday let mortgage options have been limited
To date, options for landlords have been limited with only eight properly active mortgage lenders in the market (according to Mortgages for Business). Building societies Bath, Principality, Leeds, Furness, Monmouthshire, Mansfield and The Melton are among the few offering specialised holiday let mortgages. Most high street banks and building societies will not offer mortgages for holiday lets, because a fluctuating income reliant on bookings is considered high risk.
Changing your property’s use without your lender’s consent is precarious. If a holidaymaker can find you advertising online (which you need them to do), so can your lender. Lenders do check online holiday property listings, especially if your property is in a popular tourist area. Mortgages for holiday lets will have different rates and terms from a standard buy-to-let, and not informing your lender is fraudulent and could result in serious consequences.
New lender paves the way
This week, Precise Mortgages has announced that it is launching into the holiday buy-to-let market. Alan Cleary, managing director, said: “The UK is proving increasingly popular among both British and overseas tourists which is generating attractive rental returns for holiday lets. The new criteria across the buy-to-let mortgage and bridging finance ranges will help more customers secure the product they need.”
Precise will consider UK applications on houses and flats currently being used as holiday lets. Both individual and limited company landlords will be able to borrow up to £500,000 with a maximum 70% loan-to-value, with rates starting at 2.77%.
With the implications of Brexit and the boom in home-based tourism, UK holiday lets are an increasingly attractive proposition. Landlords seeking to explore the opportunities in this sector may finally be given a broader choice of lender and mortgage products.
