According to figures from Moneyfacts, lenders have returned to the market, with the number of options, both fixed and variable, gradually increasing since last year.
Figures show that the number of deals rose from 231 in January last year to 320 in September.
Following the mini Budget the number of products fell to around 173 and have been slowly climbing back since then. Deals reaches 289 in December and have now peaked at 411.
Lenders offering holiday let deals have also increased, reaching 34 providers in January this year, up from 27 at the same time last year and the low of 26 in October last year.
Moneyfacts said that most of the lenders were building societies.
Average holiday let fixed rates have risen dramatically over the past year, going from 3.92 per cent in January last year to 6.17 per cent in January this year.
This is down from the high of 7.46 per cent in October last year.
Product availability improvements ‘positive’ but headwinds on horizon
Rachel Springall, finance expert at Moneyfacts, said that it was “positive” to see product availability bounce back following the mini Budget.
She continued: “Lenders have returned to the market and average rates have come down since October 2022, but as seen in the wider buy-to-let market, it may take time for more improvements to surface.
“Building societies continue to dominate this space and overall, there are more than 400 deals to choose from, covering both fixed and variable rate options.”
Springall noted that due to the pandemic there was huge demand for holiday lets, which encouraged buy-to-let investors to dip into the space.
“As the holiday aspirations of consumers change, demand for UK holidays could fall, but at the same time, the country is facing a cost of living crisis which may keep them interested in a more cost-effective UK break.
“However, rising interest rates may well dent the profit margins of investors during 2023 and, on top of this, the government is due to make reforms which will impact holiday let investors,” she added.
Springall explained that legislation could mandate that holiday lets would need to be rented for a minimum of 70 days a year and available to be rented out for 140 days a year.
She added that homeowners would need to “show evidence of their lettings and meet certain criteria to qualify for business rates relief”.
Springall said that the rates would come into force in April and were “designed to protect legitimate investors”.
“Landlords may be dipping into their savings due to the cost of living crisis, and the expense to redevelop a property to a high standard may be more now than in previous years. Mortgage interest rates have risen over the past year, so it is imperative prospective landlords seek advice to compare their options and consider a fixed rate deal for peace of mind.
“Investors picking a property with their head over their heart is extremely wise, and in-depth research must be done on locations and listing services to ease any concerns over letting exposure and seasonal dips,” Springall noted.
