UK: The growth of Airbnb and other vacation rental sites is forcing change within the buy-to-let mortgage market.
A landlord seeking to switch their income model from traditional assured short-hold tenancy (AST) agreement to a vacation rental will be required to remortgage by their lender before they can change the use of their rental property.
According to research by BDRC, nine per cent of landlords with more than 20 properties own UK holiday lets, and holiday lets were the second most popular property type to own alongside residential portfolios.
Until recently, vacation rental options for landlords have been limited to eight lenders. Building societies Bath, Principality, Leeds, Furness, Monmouthshire, Mansfield and The Melton are among the few offering specialised holiday let mortgages. Most high street banks and building societies will not offer mortgages for holiday lets, because a fluctuating income reliant on bookings is considered high risk.
This week, Precise Mortgages has announced it is launching into the holiday buy-to-let market. Alan Cleary, managing director, said: “The UK is proving increasingly popular among both British and overseas tourists which is generating attractive rental returns for holiday lets. The new criteria across the buy-to-let mortgage and bridging finance ranges will help more customers secure the product they need.”
Precise will consider UK applications on houses and flats currently being used as holiday lets. Both individual and limited company landlords will be able to borrow up to £500,000 with a maximum 70 per cent loan-to-value, with rates starting at 2.77 per cent.
With the implications of Brexit and the growth in home-based tourism, UK holiday lets are an increasingly attractive proposition. A broader choice of lender and mortgage products is a likely consequence of the growth of the short-term rental market.