According to Moneyfacts, there are 34 different lenders who offer holiday let deals, which is a slight rise from 32 in August last year. The majority of these are building societies.

Regarding holiday let pricing, the rates start at 5.2% as of August this year, which is down from 6.54% in January. This is also a fall from 7.16% in August 2023.

However, Moneyfacts said that challenges lie ahead for holiday lets, pointing to the confirmation that the furnished holiday let scheme will be abolished in 2025. This means holiday let landlords will not be eligible for certain tax advantages.

Brokers operating in the space have mixed opinions on where the holiday let market is headed, with some thinking that the “heyday” of holiday let is truly over, whereas others say that demand is still strong.

 

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‘Holiday let owners will be facing challenges ahead’

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said that the buy-to-let (BTL) market has “undergone its fair share of upheaval over the past few years, with rising interest rates and tax perks quashed”.

She continued: “However, a small part of this market has flourished over the past couple of years, with the availability of holiday let deals rising. There has also been an encouraging increase in the number of lenders prepared to cater to these types of landlords.

“There are over 400 deals for consumers to choose from, and the majority of lenders that currently operate within this space are building societies.”

Springall said that holiday let owners will be “facing challenges ahead”, as from April next year there will be “significant tax changes taking place [that] are designed to promote fairness and align tax rules for furnished holiday lettings with those for other property businesses”.

“To mitigate tax liabilities, it is essential consumers seek advice to go through how the abolition of the furnished holiday let tax regime will impact them. These changes will no doubt come as a blow to both existing and prospective landlords, but the demand and profitability of a holiday let could still be worth weighing up. It would be wise for new investors to do their research and pick a property to let with their head, not their heart, and getting advice from a listings service is also wise to explore seasonal dips,” she noted.

Springall continued that demand for holiday lets in the UK could rise, as holidaymakers may “struggle to save enough cash to cover the price of a holiday abroad or have been put off altogether by last-minute flight cancellations”.

“A break away in the UK could then be a safer and more affordable alternative, so holiday lets could be a great option.

“However, costly pitfalls might also arise, so holidaymakers must take time to do their research into the location, time of year, local events and the length of the break to ensure their ideal break away stays within their budget,” she concluded.