Holiday Let Mortgages: What You Need to Know in 2025
- Adrian Collins
- 3 days ago
- 6 min read
Despite unpredictable UK weather, staycations remain popular. In 2024, around 57% of Brits enjoyed a holiday at home. Many are now investing in holiday lets to earn income while enjoying mini-breaks themselves.
If you're thinking about purchasing a holiday home to rent out, it's essential to understand not just your mortgage options but also the potential risks and challenges involved. This guide will walk you through how holiday-let mortgages work, what you can borrow, the costs, as well as highlight the top UK destinations for holiday homes, helping you make a well-informed decision.
What is a Holiday Let Mortgage?
A holiday let mortgage is a specialised loan designed for properties that are rented out to holidaymakers. Unlike standard buy-to-let mortgages, holiday let mortgages are tailored for properties that operate as short-term rentals, often in popular tourist destinations.
Key differences include:
Purpose: Specifically for properties used as holiday accommodation.
Lending criteria: Often more stringent, requiring evidence of income potential.
Lender terms: May have different interest rates, deposit requirements, and repayment terms.
Why Consider a Holiday Let Mortgage?
Investing in holiday lets can provide:
Higher rental yields: Holiday lets often generate more income compared to traditional long-term rentals, making them a more profitable investment.
Flexible property management: You can choose to rent out the property during peak seasons while retaining the option to use it yourself during holidays, offering both income and personal enjoyment.
Seasonal income opportunities: Renting out during busy holiday periods can maximise income and better justify the costs of owning and maintaining the property.
Please remember:
Holiday let mortgages come with specific financial commitments.
Market conditions and travel trends can affect occupancy and income, so thorough research and careful planning are essential.
Are Holiday-Let Mortgages More Expensive?
In the UK, holiday-let mortgages tend to have slightly higher costs compared to standard buy-to-let mortgages. This is because interest rates are often a bit higher, reflecting the short-term nature of holiday rentals. Additionally, these mortgages typically require a larger deposit, usually between 25-30%, so it’s important to factor this into your planning. To find the best deal, it’s advisable to speak with a mortgage broker who will check in with different lenders and explore a range of mortgage products tailored for holiday lets. Doing your research now can help you secure the most suitable and cost-effective option.
Understanding the Requirements for Holiday Let Mortgages in the UK
Criteria for holiday let mortgages can vary depending on the lender and the specific property, but there are some common requirements that most will look for, such as:
Deposit: Usually between 25% to 30% of the property's value.
Income proof: Evidence of projected income, often based on occupancy rates and seasonal variability.
Property location: Some lenders prefer properties in popular tourist destinations or specific regions.
Property details: The property must be suitable for short-term rental, often with amenities and features appealing to holiday guests.
Experience: Some lenders prefer borrowers with previous experience in managing holiday rentals.
Risks and Challenges of Holiday Let Investing
Demand can fluctuate due to economic downturns, seasonal variations, or global events, for example the COVID-19 pandemic.
Local regulations are changing; stricter licensing requirements may affect your ability to rent out the property.
Seasonal demand can lead to inconsistent income, making cash flow less predictable.
Ongoing management and maintenance are often more intensive than with long-term rentals.
It’s important to consider these factors and plan for potential challenges to maintain a sustainable and profitable investment.
Tax and Insurance Considerations
Owning a holiday let comes with specific tax obligations. Rental income is taxable, and allowable expenses (mortgage interest, insurance, maintenance, and management costs) can often be deducted. There may also be VAT implications depending on your turnover and the services offered. It’s advisable to consult a tax professional to understand your liabilities and benefits.
Additionally, your property needs appropriate insurance coverage tailored for holiday lets. This typically includes specialist landlord and liability cover, as standard property insurance may not suffice. Proper insurance protects against damages, theft, and liability claims, ensuring your investment is safeguarded.
Market Trends and Opportunities in 2025
The holiday let market continues to grow, driven by the rise of platforms like Sykes Cottages, Airbnb, Vrbo and Booking.com. Increased demand for unique, flexible accommodation means there are good opportunities for investors.
However:
Regulations around short-term rentals are becoming stricter in some areas, requiring licensing and compliance.
Interest rates are fluctuating, so locking in a competitive fixed rate can be beneficial.
Environmental and sustainability standards are increasingly important, affecting property renovation and management costs.
Know the Regulations and Licensing for UK Holiday Lets
Short-term rental regulations are changing across the UK, and these changes can affect your holiday let investment in several ways:
Licensing and Registration: Many areas now require holiday let owners to obtain specific licenses or register their property with local authorities. This is to ensure they meet safety and management standards.
Safety Standards: Properties must comply with safety regulations, such as fire safety, gas safety, and ensuring the property is safe for guests. Failing to meet these standards can lead to fines or legal issues.
Planning Restrictions: Certain regions have strict planning permissions that limit or control holiday lets. It’s important to check local rules before buying or renting out a property.
Why Does This Matter? Being aware of and compliant with local planning laws and regulations helps you avoid fines, legal issues, or even having your rental activity halted. Doing your research now can prevent problems later and help ensure your investment operates smoothly.
Top UK Destinations for Holiday Lets with High Rental Yields
The most popular holiday destinations in the UK that typically offer reliable and healthy rental returns for holiday let investments tend to be areas with strong tourist appeal, good infrastructure, and consistent demand. Here are some of the top locations:
1. Cornwall & Devon
Known for stunning beaches, surf spots, and scenic countryside.
Highly popular year-round, especially in summer, attracting families, couples, and surfers.
2. The Lake District
Famous for its lakes, mountains, and outdoor activities.
Consistent demand from tourists seeking outdoor adventures and scenic breaks.
3. The Cotswolds
Charming villages, historic towns, and rolling countryside.
Popular for luxury weekend getaways and romantic breaks.
4. The Scottish Highlands & Islands
Breathtaking scenery, castles, and whisky tours.
Strong demand from international and domestic holidaymakers.
5. Brighton & Sussex Coast
Vibrant seaside city with a lively arts scene and beach access.
Popular for short stays during the summer months.
6. York & North Yorkshire
Rich history, medieval architecture, and scenic countryside.
Attractive for cultural and countryside holidays.
7. Wales (Snowdonia & Pembrokeshire)
Rugged landscapes, beaches, and outdoor activities.
Growing popularity among adventure seekers.
Practical Tips for Managing Your Holiday Let
Consider hiring a property management company to handle bookings, cleaning, and guest communications, especially if you don’t live nearby.
Use popular rental platforms like Sykes Cottages, Airbnb, Booking.com, or Vrbo to maximise occupancy.
Furnish your property with quality amenities to attract positive reviews.
Stay updated on local licensing and safety standards to remain compliant.
Regularly review pricing strategies and marketing efforts to optimise occupancy rates.
Competition and Consumer Expectations
To succeed in the competitive holiday let market, owners need to adapt to evolving guest expectations and stand out from the crowd. Key points to consider are:
Increased competition means owners need to offer high-quality, transparent listings to stand out.
Creating memorable guest experiences is essential for attracting repeat bookings.
Travellers are more discerning and expect honest representations of properties online.
Accurate listings and reliable reviews are crucial for building trust and attracting guests.
Common Questions (FAQs)
Q: Can I use a standard buy-to-let mortgage for my holiday let? No, holiday let mortgages are specifically designed for short-term rentals. Using a standard buy-to-let mortgage may breach your loan agreement and cause legal issues.
Q: What’s the difference between a holiday let mortgage and a second home mortgage?A second home mortgage is for properties you own but do not rent out regularly, whereas a holiday let mortgage is for properties actively rented to short-term guests.
Q: How much deposit do I need for a holiday let? Typically, lenders require a deposit between 25% and 30% of the property's value.
Q: What are the typical ongoing costs of owning a holiday let? Costs include mortgage payments, insurance, maintenance, cleaning, utilities, and property management fees.
Q: Can I use my holiday home for personal holidays? Yes, many holiday let owners use their property personally, but it must be primarily intended for rental use, and you should check local regulations regarding personal use.
Final Thoughts
Investing in a holiday let can be a rewarding and profitable venture if approached carefully. From understanding the regulatory landscape to choosing the right location and managing your property effectively, preparation is key. By staying informed about market trends, compliance, and operational best practices, you can maximise your rental income and enjoy the benefits of owning a holiday home.
If you're considering this exciting opportunity, speak with a mortgage broker. Getting professional advice will help you make confident, informed decisions.
Contact us today for tailored support on your holiday-let journey.
Your property may be repossessed if you do not keep up repayments on your mortgage
Not all Buy to Let Mortgages are regulated by the Financial Conduct Authority
Published by Adrian Collins, Founder of Beechwood Mortgages Ref: 219335 with review and approval from Stonebridge Mortgage Solutions Limited who is authorised and regulated by the Financial Conduct Authority Ref: 454811.
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