Despite huge upheaval in recent times, the holiday let market has remained resilient.
In the Budget, we saw an increase in stamp duty on second homes. The government has also removed furnished holiday let rules, and local councils can request the power to demand planning permission for new holiday lets.
As such, it’s natural for brokers to feel anxious about working with holiday let mortgages.
However, despite recent changes in the industry, we at Holiday Cottage Mortgages are pleased to say that the market remains strong. We’ve actually seen a significant increase in enquiries for holiday let mortgages when compared with this time last year, which reflects the continual interest in holiday letting.
The demand for quality holiday lets remains strong and shows no signs of abating. Plus, despite changes to how holiday let owners pay tax, the long-term holiday let investment model still works, with great potential to generate a healthy income.
From a broker’s point of view, working with holiday let mortgages can be very rewarding, but it does come with its challenges.
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Holiday let checklist
If you’re thinking of working with holiday let mortgages, here’s what you can expect:
• Mortgage applications from complex clients. It’s common for applicants to have multiple income streams, be self-employed or expats, and sometimes to have a portfolio of properties.
• Applications for complex properties. This includes mixed-used residential properties, homes with attached or unattached annexes, grade-listed buildings, multi-unit buildings, split title deeds, and properties that are for holiday use only.
• Enquiries for limited companies (LTDs). As a result of the government’s tax changes, there’s been a huge shift in people buying property via an LTD. As a result, mortgage brokers must be able to navigate special purpose vehicle (SPV) transactions and their nuances. This means understanding SIC codes, regulations around source of deposit and intercompany loans, mirrored shareholders and directors, and personal guarantees.
• Holiday lets may now require planning permission. New measures include a national register that monitors holiday lets, plus the council having the power to insist on planning permission for new holiday lets. In areas where there are concerns about the number of holiday let properties, the local council can apply for an Article 4 Direction; this revokes a person’s automatic rights to turn a residential home into a holiday let. Brokers will have to understand that because of this regime, there might be a complex framework to mortgage applications.
• Mortgage applications with much longer timescales. Due to the added complexities that holiday let mortgages present, and the fact that holiday let purchases tend to be discretionary transactions, brokers should be aware that there’s a lot of admin to wade through and time involved before the final product is complete.
Yes, holiday let mortgages are more complex and recent changes have compounded that problem.
But these types of mortgages have always been far more nuanced than regular residential mortgages. For a skilled and patient broker, the market is very rewarding; brokers will work with interesting clients and see some of the country’s best properties, making these transactions wholly worthwhile.
