We may be in the middle of a cold and damp British winter, but the UK’s peak staycation season is just around the corner, bringing with it holiday let mortgage opportunities for brokers.
The holiday let market has experienced its share of ups and downs over the past few years, yet interest from investors remains steady. We continue to see an appetite among both UK-based buyers and expats when it comes to owning a holiday let in profitable locations, such as the Lake District and the Cotswolds.
Holiday lets often tick all of the boxes for investors; they offer a source of income, the potential to benefit from rising house prices over time, and a place to use personally when not rented out. This can be particularly appealing to expats who might need a place to stay when returning to visit family and friends in the UK.
In 2024, we heard about the government’s plan to abolish the Furnished Holiday Lettings (FHL) tax regime, removing certain tax benefits for holiday let owners from April 2025. While this may have caused some commentators to write off the market – we continue to see buyers who are not deterred by the change in legislation.
Now that investors have had time to digest the news, some may reach out to brokers for advice – particularly those with more complex circumstances. This makes it all the more important for brokers to stay informed about the market.
A LONG-TERM INVESTMENT
For expats working and living overseas, many rent while abroad and instead look to buy in the UK, whether through a buy-to-let (buy-to-let) or a holiday let. With research from Currencies Direct showing 39% of Brits are thinking about relocating overseas, the expat community is expected to grow further in 2025.
For expats on extended contracts abroad, such as those in the United Arab Emirates (UAE), where work visas can last up to ten years, a holiday let could offer a profitable long-term investment.
Certain locations, like the Lake District and the Cotswolds, will always attract tourists – not just from the UK but from further afield as well. According to the Sykes Holiday Letting Outlook Report, the average annual income from a holiday let in the Cotswolds is £28,500, while properties in the Lake District generate around £28,200 annually.
We saw the market for staycations explode during the pandemic, and while some of this demand may have waned now that holidaymakers are free to travel the world, there is still a strong market for UK holiday rentals in the right locations. Just as before the pandemic, these properties can deliver good returns for investors, especially if interest and mortgage rates continue to decline further in 2025.
Bank of England Governor Andrew Bailey recently suggested that up to four base rate cuts could be on the cards for 2025. If rates begin to drop, it could reignite further interest in the holiday let and also buy-to-let markets. Similar to holiday lets, the buy-to-let sector has experienced its share of challenges in recent years, yet its fundamentals remain solid and the market also still continues to attract interest from both UK-based investors and expats.
Looking ahead to 2025, the outlook for rental growth remains optimistic. Both Savills and Knight Frank forecast a 4% increase in rents next year, with cumulative growth of 17.6% projected between 2025 and 2029. With demand continuing to outstrip supply, and many landlords who planned to sell believed to have already left the market, there are potentially lots of opportunities for investors in 2025.
GROWING OPPORTUNITIES FOR BROKERS
We’ve seen steady growth in demand for holiday lets and buy-to-lets throughout 2024, driven by both UK investors and expats. Brokers who aren’t already active in these markets should take note, as we believe they are ones to watch in 2025.
While the underwriting process for expats earning in a foreign income can be a bit more complex, brokers shouldn’t be discouraged. Multiple income streams and the need to verify foreign employers can create challenges for some lenders, but specialist building societies such as ourselves are well-equipped to handle such cases and can help brokers with personalised solutions for their expat clients.
The same applies to UK-based investors – our manual underwriting approach allows us to assist with even the most complex cases on an individual basis.
For expats and UK investors considering a buy-to-let or holiday let mortgage in 2025, there are specialist building societies ready to help bring those plans to life.
