Holiday lets have always been a niche area of the mortgage market, but it is one that we believe will grow significantly.
We have been an active lender in this space for many years and always see activity increase after the summer holiday season. Whether people have been overseas or somewhere in the UK, there’s more interest when they return fresh from their travels.
This year we are expecting to see more activity as the shape of the holiday and buy-to-let markets change. We believe there are a number of factors driving this change.
Each year ABTA, the travel trade association for tour operators and travel agents, assesses the sentiment of UK holiday makers. Its 2018 report shows that people are still generally taking holidays overseas.
However, there was a seven per cent increase in the amount of people who are confused about the effect Brexit will have on their holidays, up to 43 per cent from 36 per cent in the previous year.
More were also concerned about the cost of their holidays, up to 54 per cent from 51 per cent, and worried that it will be harder to travel, reaching 48 per cent compared to 43 per cent last year.
This analysis was conducted before Boris Johnson became prime minister, when the threat of no-deal increased and the value of sterling fell.
One can only assume that the confusion is set to increase and could encourage more people to remain onshore for their holidays.
In June of this year, holiday lettings business Cottages.com said it had seen 23 per cent growth in portfolio recruitment in the first six months of the year compared to the same period in 2018.
It attributed this to landlords taking advantage of the predicted UK growth in staycations.
In addition, there is a belief that the rise is being driven by owners moving from buy-to-let to holiday lets as a result of the regulation and taxation changes in the private rental sector.
As has been well documented, profits in buy-to-let properties are under pressure.
Clearly, if the demand for domestic tourism continues to grow, enquiries about holiday let properties will increase.
A growing segment
Lettings agencies are also reporting as much as 25 per cent growth in bookings year-on-year.
We know from experience that holiday let mortgages can be complicated and this is one reason why many lenders shy away from them.
This is a niche area and suitability cannot be assessed through computer modelling alone.
The opportunity for brokers, and those looking for extra income from second homes, is growing and many indicators are pointing to this being a continuing source of new business.