Skip to content

Holiday lets | Discover Why it Has Gain Ground Against BTL

Holiday lets

Holiday lets


Holiday lets are becoming the preferred choice for investors, surpassing traditional buy-to-let (BTL) options. The potential for higher returns and diverse advantages drives this trend. Investors are increasingly attracted to short-term rentals due to their promising financial prospects.

Advantages of Holiday Lets

Firstly, holiday lets offer greater flexibility and higher rental income. Investors can capitalise on peak vacation seasons, maximising profits during high-demand periods. Unlike traditional BTL properties, holiday lets present an opportunity for greater financial gains. Consequently, they are becoming more appealing in the competitive real estate market.

Moreover, the rise of online platforms has made managing and promoting holiday lets easier. Digital marketing allows investors to reach a global audience, increasing their property’s visibility. The convenience of online booking platforms streamlines the rental process, making holiday lets a viable and efficient investment strategy.

A Shifting Paradigm

This trend signifies a shift in the real estate market. Short-term rentals’ unique advantages and evolving dynamics position them as a promising avenue. Investors seeking financial returns are drawn to the flexibility and adaptability of holiday lets. The growing popularity of holiday lets highlights their potential as an emerging investment trend.

In summary, holiday lets are becoming a preferred investment due to their potential for higher returns, flexibility, and the ease of online management. This shift marks a significant change in the real estate landscape, offering promising opportunities for investors.

Holiday lets | The benefits of staycation

Holiday let products have become popular over the past year. Tax benefits, a staycation boom, and lockdown savings have spurred potential investors into action.

While temporary Covid-driven international travel bans have boosted yields and occupancy levels for UK holiday let properties, underlying factors suggest continued growth. This trend is expected even as borders reopen.

Drew Somerston
Drew Somerston, Associate Director at LDN Private Clients

Drew Somerston, associate director of private clients at LDNFinance, noted a significant increase in enquiries over the past eight to twelve months. He attributed this to Covid and other reasons.

Support from local holiday letting agencies and user-friendly websites has made the option appealing to investors. Moreover, those previously considering out-of-town properties now find seaside or countryside locations more attractive.

The range of products offered by lenders has added momentum to the market. Various options are available depending on the client’s needs. For instance, clients can use the property as a residence most of the time and let it out for part of the year. Alternatively, they can buy it as a holiday let with a mortgage. Many lenders allow up to three months of personal use annually.

Lenders’ criteria vary, including minimum personal income requirements, acceptance of Airbnb lets, first-time letting ventures, and allowances for personal use.

BTL versus Holiday lets

Holiday let mortgages offer advantages over buy to let (BTL) options. They include more favourable tax rules and potentially less strict affordability calculations due to higher yields.

Liz Syms
Liz Syms, CEO and Founder of Connect

Insights from Industry Leaders

Liz Syms, CEO and Founder of Connect Mortgages explained: “To understand the market, consider the tax changes phased in from 2017. Before these changes, there wasn’t a holiday let mortgage market. People would use BTL mortgages for holiday lets.”

Lenders responded to the tax policy shift by developing more holiday let products. According to Moneyfacts, as of 23 June 2021, 159 holiday let mortgages were available from 24 lenders. These comprised 91 fixed and 68 variable rates, including three tracker deals. The average fixed rate on a holiday let product was 3.87 per cent.

The list of 24 providers included 18 building societies and six private banks.

Somerston noted: “Rates are slightly higher than standard BTL. As the market grows, mainstream BTL lenders might enter this lucrative sector.”

Holiday lets | Product variation

Damian Cain
Damian Cain, director of Complete FS

There are two types of holiday let mortgages. One is a buy-to-let (BTL) product allowing holiday lettings. Affordability is calculated based on income from an assured shorthold tenancy (AST). The second type is a commercial loan. This loan assesses the profit and loss of the lettings business.

“They will ask a local holiday letting agent to advise on seasonal rates for the property. Assuming 30 weeks of occupancy, they take an average,” said Damian Cain, director of Complete FS.

Holiday let business income is typically 50% higher than a standard AST. National parks, coastal towns, villages, and countryside beauty spots are in scope. However, location restrictions apply.

Chris Blewitt, head of intermediary distribution at Darlington Building Society, believes staycation culture will continue. This will support the holiday lets market beyond the end of flying restrictions.

Darlington Intermediaries launched its holiday let offering two weeks ago. They put the plans on hold during the lockdown in spring 2020.

“We’re in the North East, near the beautiful Northumberland coastline, and we have historic sites. It’s always been there, but holiday brochures to Spain can be enticing.

“In the longer term, people will want to visit the world. However, lets in traditional places like the Lake District and seaside resorts, will continue to be stronger than pre-pandemic,” he said.

Holiday let mortgages come in two forms: BTL products and commercial loans. The income potential from holiday lets is generally higher than ASTs. The staycation trend is expected to sustain the market, particularly in scenic UK locations.

Why Join The Connect Network