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Big surge in choice of mortgages for holiday let landlords

There’s been a surge in the number of mortgage products aimed at landlords in the holiday let market.

There’s been a 45 per cent increase in mortgage choices in this sector in the past six months, and product availability is now double that in August last year, according to independent mortgage market monitor, Moneyfacts.

The organisation’s finance expert, Rachel Springall, says: “There are now more lenders offering options than six months ago – back to a spread seen in March 2020 before lockdown began – but it appears that building societies are more inclined to provide deals to meet growing demand, whether for someone who uses their own home or takes out a new loan to fund the holiday let investment. 

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“According to a recent survey by Hodge Bank, out of those purchasing a holiday home, 65 per cent take out a new holiday let specific mortgage and 35 per cent remortgage their existing home to finance their holiday home.”

Springall adds that for investors who feel staycations are here for some time to come, supply of stock may be an issue with Rightmove reporting that new listings stock is down 25 year-on-year on average across the UK. 

“Any lack of holiday home opportunities will come as frustrating news for investors considering the return of holiday let deals on to the market, especially as sales figures nationally are rising and some consumers have more disposable income from lockdown and are therefore ready to invest” she comments.

Currently holiday lets are under scrutiny by HM Revenue & Customs for possible future tax reform.

At the moment, the holiday let tax status is more favourable to investors than buy to let because HMRC classes a ‘furnished holiday let’ as a business, with consequently lower taxes. 

Owners must meet certain criteria, chiefly that the home is available to let for 201 days a year and is actually let for at least 105 days, with no single letting exceeding 31 days; and, of course, the property must be fully furnished. 

Last month the government gave notice of change in a statement which said: “The government will legislate to change the criteria determining whether a holiday let is valued for business rates to account for actual days the property was rented, following a previous consultation. This will ensure that owners of properties cannot reduce their tax liability by declaring that a property is available for let while making little or no actual effort to do so.”

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