Holiday Let Mortgages in 2025: Opportunities Brokers Need to Know
Despite living through the current cold and damp British winter, the UK’s staycation season is almost upon us, with the interest in Holiday Let mortgages for 2025 set to remain strong for both UK based borrowers and Expats in this upcoming season.
In this article, we will review why the demand for holiday let mortgages is still rising, how borrowers are adapting to recent challenges like tax changes, and the opportunities available for investors and brokers in the year ahead.
A resilient market
The holiday let market has faced various challenges in recent years, whether that has been through increased competition, economic changes or the impact from the Covid pandemic, creating uncertainties around rental income.
That being said, Holiday Lets are continuing to thrive with many viewing it as a great source of income while benefiting from potential property appreciation. According to Sykes Cottages' 2024 Holiday Let Report, the average turnover for 2023 was £24,500, showcasing an increase from £24,000 in 2022. This steady growth highlights the market has still remained strong despite recent challenges.
Holiday lets also offer the comfort blanket of having a property available to use when not on the holiday let market. This is particularly appealing for expats who may choose to reside in the UK for set periods throughout the year.
Some of the best places to buy a holiday home in the UK like Lake District or Cotswolds continue to attract high numbers of tourists and are a lovely area for a staycation for expats.
Adapting to recent tax changes
In 2024, the government announced plans to end Furnished Holiday Lettings (FHL) tax benefits starting April 2025.
This was implemented to try and address perceived tax revenues or inequalities in the tax system within the holiday let market, where those who have an FHL were benefiting from reduced tax rates on certain income and capital allowance.
In the wake of this announcement, this has raised some concerns for Holiday Let investors. However, there is little to interpret from this announcement, with the feeling many investors are going to continue to move forward despite these setbacks and are prepared to adapt once the changes have been made.
Long-term investment appeal
For expats living abroad, investing in a holiday let in the UK could be a profitable venture, and we’re seeing an uprise in interest for it. According to the Currencies Direct British Expat Report, over 23% of Brits are considering relocating overseas, suggesting the expat community is continuing to expand for 2025.
In regions like the United Arab Emirates, where work visas can last up to ten years, a UK holiday home could provide both investment returns and a personal retreat.
Tying back to the earlier idea, with Holiday Lets garnering higher turnover each year, this type of investment becomes even more appealing for those seeking long term financial growth and lifestyle benefits.
Consistent staycation demand
Staycations have remained consistently popular over the last few years. Even during the pandemic when a lot of holiday lets faced closure, the demand for the staycation market surged.
Statista revealed that during the Covid-19 pandemic in 2020, the term "staycation" saw a year-over-year growth of over 500%
Fast forwarding to present day, the holiday let market may receive an additional boost if mortgage rates decline further. The Bank of England Governor Andrew Bailey has recently suggested that there could be up to four base rate cuts in 2025.
The impact of this could be huge, as this could lead to lower borrowing costs, sparking a larger interest in both holiday let and buy-to-lets investments.
Rental market for 2025
The rental market is looking optimistic for the new calendar year. Savills has already projected a 4% rental growth in 2025.
Since there are more people looking for rentals than there are homes available, the high demand could greatly benefit landlords and may lead to higher rents in response to the situation.
In turn, this could drive a surge in investors to captialise on opportunities in the holiday let or buy to let market.
Opportunities for Brokers
Throughout 2024, we have seen steady growth in demand for holiday lets and BTLs, driven by UK investors and expats. Brokers who are not yet active in these markets should take note, as we believe they present key opportunities for 2025.
We understand that underwriting for expats earning in foreign income can be complex. However, our specialist underwriters are well-equipped to deal with complex cases.
We review each case thoroughly, so any challenges such as verifying foreign employers and handling multiple income streams can be overcome with our personalised solutions. Our human underwriting approach also supports UK-based investors, enabling us to assist with even the most complex cases on an individual basis.
If your client is an expat or UK investor considering a holiday let or buy to let mortgage in 2025, we can help turn their complexities into simple solutions. Visit our contact us page and speak to our friendly team today for assistance with a case.
Conclusion
Holiday let mortgages are continuing as a popular investment as we move into 2025. Despite incoming tax changes from the government, the sector continues to thrive.
With steady rental income and property appreciation, they offer lifestyle and financial benefits, making them an enticing proposition for both expats and UK-based investors.
That being said, as we look to the future, the demand for holiday lets is likely to make 2025 a promising year for both borrowers and brokers.
If you are a broker with a client looking for a holiday let mortgage, you can review our holiday let criteria and products today.
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