Over 10 million UK adults* consider becoming a holiday let landlord
The past two years have seen a resurgence in UK holidays, and as factors like travel restrictions, increasing flight prices, and a growing awareness of climate change, made home getaways more appealing. Nearly one in five UK adults (17%) contemplated buying a holiday let property during the pandemic, according to new research from Suffolk Building Society.
Younger people led the trend, with those aged 18-34 most likely to have thought about buying a holiday let property within the past 24 months.
Two urban areas had the highest number of prospective landlords, with those living closest to London at 32%, followed by people in the West Midlands (19%).
This increased interest in holiday let properties is mirrored at Suffolk Building Society, with both the volume of and total value of, completions for new holiday let purchases doubling between 2020 and 2021.
Location is important for holiday let landlords
The setting of the property was more important than other factors such as renovation potential, or proximity to amenities, for potential landlords. The key aspects for wannabee landlords when considering buying a holiday let were:
It’s easy to understand why the idea of owning a holiday let home is so attractive. As people were limited to holidaying in the UK, often within an area they know and love, their eyes were opened to the opportunity of increasing their income, as well as enjoying a property for personal use too.
Suffolk Building Society’s Head of Mortgages, Charlotte Grimshaw
“However, prospective landlords would be wise not to get carried away in the holiday spirit as the purchase needs to stack up financially too – especially for those who require a mortgage on their holiday let property. Our advice to anyone considering this route would be to ensure you understand the criteria that mortgage lenders will be looking for as it can be quite different to a standard residential mortgage application, or even a standard buy to let mortgage too.”
A holiday let is for life not just for the pandemic
Of those who expressed their interest in becoming a holiday let landlord, almost a third, (32%) said Covid-related restrictions inspired them to look into holiday lets, however, half (50%) claimed it was always part of their plan.
Devon and Cornwall were the locations that most wannabee holiday let landlords were considering, followed by the Lake District, Peak District and Yorkshire Dales.
“The pandemic helped many of us rediscover what the UK has to offer, and this of course also has a positive impact on the environment too. Instead of automatically jetting off to warmer climates, eco-conscious holidaymakers are realising they can enjoy numerous destinations around the UK whilst minimising their carbon footprint and supporting domestic tourism at the same time.
“Before jumping on the bandwagon, potential owners should do their due diligence; consider the financial commitments of not just the purchase but the maintenance, taxes, and other expenses such as cleaners and gardeners. It’s also worth taking the time to understand the market, and check out the competition before falling in love with a property that isn’t viable in terms of lettings.”
Tips for holiday let landlords who require a mortgage to purchase
- Be aware that many holiday let mortgages require a landlord to have a mortgage, own their main residential property first, or have a buy to let property already – and in some instances, a combination of these.
- Understand that some lenders also have age restrictions for first-time landlords, even if they are already residential homeowners.
- Affordability assessments for holiday let properties are usually calculated on the property’s rental potential rather than personal income and outgoings, but the lender will still want to understand the applicant’s financial position.
- Applicants may have to demonstrate a minimum income set by the lender but this income can often be from a combination of employment, self-employment, investments, pensions etc.
- Be prepared to show third party evidence of rental value in low, mid and high seasons from a verified lettings agent – even if not planning on using an agency to manage the property.
- Expect that the property will also be assessed by the mortgage lender. Properties in holiday parks, caravans or lodges, and those with unusual construction methods may not always be accepted.
- Applicants should not assume they can market their property on short-term lettings sites such as Airbnb and Vrbo – some mortgage lenders have certain rules that prohibit this.
- Check the amount of personal use allowed so as not to breach T&Cs. Mortgage companies will always allow the owner a certain amount of personal use but this can vary.
- Check whether the mortgage lender has a limit on the number of holidays let and/or buy to let properties that the landlord is allowed to own.
- Specialist holiday letting insurance must be arranged with public liability cover (typically a minimum of £1m) included.
“Applying for a holiday let mortgage can be a little more complex than applying for a traditional residential property or buy to let, so it can be helpful to approach an independent mortgage adviser to ensure the application has the best chance of success. A mortgage adviser will also have a good understanding of the different criteria that mortgage companies request, helping landlords find the most suitable product.”
Charlotte Grimshaw
*Figure calculated by an estimated number of UK adults (52.9 million) according to Office for National Statistics, multiplied by the percentage of survey recipients considering buying a holiday let (17%).
** Research was conducted by Opinium Research on behalf of Suffolk Building Society between 22-25 February 2022 amongst 2,000 UK adults aged 18+.
