Ashley Pearson, Head of Intermediaries at Loughborough Building Society
Owning a holiday let can come with any number of obstacles, yet if done well, the holiday let sector can provide investors with a steady and reliable income stream throughout the calendar year.
As a holiday let owner myself, I’m well aware of the challenges the sector has encountered over the last few years. The Covid pandemic saw bookings dry up as the UK population was forced to stay at home, while the subsequent easing of these restrictions saw people immediately head overseas in search of a change of scene.
More recently, rising interest rates and the cost-of-living crisis brought further trials and tribulations, with many households compelled to rein in their spending in an attempt to navigate an uncertain economic environment.
However, with interest rates now starting to fall and the economy showing increased signs of stability, 2024 has seen a return to form for the UK holiday let sector, with research from Mintel showing that over half (55%) of UK holidaymakers have chosen to holiday at home instead of abroad this summer.
With the summer holiday season slipping beyond its peak, some potential investors might be inclined to dismiss the idea of purchasing a UK holiday let in 2024. However, it’s important to remember that holiday lets can be a viable and profitable investment throughout the year.
Whether it’s a last-minute winter weekend getaway, a half-term break with the kids, or a celebratory few days with family and friends, demand for holiday lets remains strong and is an option always worth considering for any property investor. Many lenders remain committed to this market and are well-positioned to assist brokers with clients looking to purchase a new holiday let or refinance an existing one.
With some holiday let products allowing up to 60 days a year for personal use, investors could use this time to carry out or oversee renovations. For those nearing the end of their current mortgage term, remortgaging to raise capital could be a smart move, as it allows investors to tap into the equity in the property to cover any renovation costs. Renovations which could range from general repairs and maintenance to more extensive projects such as installing a new kitchen or bathroom.
This approach can help property owners maximise occupancy rates during the rest of the year, increase profitability, and boost demand, particularly if the property receives five-star reviews from guests.
Balancing the individual needs, demands and financial circumstances of any holiday let owner is crucial, which is why we assess and underwrite each application on its own merit.
Not only does this enable us to get a clear idea of the borrower’s unique situation, but it also allows us to answer any questions the broker may have to ensure they remain well informed.
This can prove particularly useful in terms of understanding the requirements relating to rental assessments and holiday letting management companies, such as the number of lettable weeks and total expected rental income amount.
For example, if a property is rented out for 45 weeks of the year and makes a return of £30,000 annually, we could use the rental income calculation in an affordability assessment, rather than the number of weeks it’s occupied.
Obviously, these factors will vary between each applicant and each property, which is why we work so closely with our intermediary partners to determine the specific needs and demands of every client. By speaking to a lender that specialises in holiday let mortgages, brokers can ensure they get the best deal for their client’s specific circumstances while also helping them to maximise the return on their investment.