Holiday Lets: A committed partnership
Grant Seaton, Head of Intermediary Lending at The Cumberland shares his thoughts on the current UK Holiday Let market.
Despite changes to the tax treatment of furnished holiday lets, the business case for this type of property rental for brokers and investors remains strong, with the appeal of ‘staycationing’ on the rise and a remortgage boom on the horizon.
A Sykes report showed that last year, 77% of Brits planned to take a break in the UK, up from 75% the previous year, drawn by the potential for a stress-free, more economical holiday. However, in a blow to existing and prospective investors, in November last year, the Chancellor abolished a raft of favourable tax allowances benefiting furnished holiday lettings. These included the ability to offset all costs, including mortgage interest, against income, tax-advantaged pension contributions, and capital allowances on fixtures and fittings. These changes come into effect on 6th April 2025.
The remortgage surge
Despite these tax changes, the case for well-managed holiday let investments with the right financing in a popular location remains robust. Many committed holiday let owners are expected to refinance, refurbish, or expand their lettings portfolios this year.
We have seen several spikes in remortgage business levels in August, October, and November last year, with another projected shortly in March. For many landlords reaching the end of their five-year fixed-rate terms, arranged during the pandemic, today’s lower, better-value rates will drive broker enquiries—so it makes sense to be prepared.
Tightening criteria
However, market volatility, a challenging economic environment, and shifting lending policies from providers will make placing holiday let cases more challenging for brokers.
Despite the predicted remortgage surge this year, navigating which lender will support your client may become a more complex challenge as criteria appear to have tightened across the marketplace. The Cumberland is not among those tightening criteria, in fact we made several positive improvements to criteria in October 2024 and have fully committed to being in the holiday let market for the long term. As a broker it is advisable to review your back book of clients to identify and support those who may look for more favourable terms.
Other lenders have also capped the maximum number of properties they are willing to accept within a borrower’s portfolio. We continue to offer mortgages on up to 10 properties within a portfolio of up to 20. This can be within Sole Trader, Partnership or Limited Company entities, with the letting property located in Scotland, England or Wales.
Brokers must also keep up to date with the lenders offering limited company lending. Currently, only half of the UK’s holiday let lenders are willing to operate in this space, despite the increasing number of landlords purchasing investments through limited companies. For brokers, it is essential to know which lenders are open to these cases.
Some providers now require additional security on Limited Company applications, such as personal guarantees from company directors. We do not, and we are comfortable lending up to 75% LTV after a thorough assessment of the holiday let’s business case and the investor’s track record—though we welcome first-time investors too.
The Old Grain Mill
One particularly memorable holiday let case brought to us by broker Enness Global was an old Scottish grain mill located on the outskirts of Eyemouth and Ayton. Valued at nearly £2 million, the broker had struggled to secure financing as other lenders found it difficult to value the property due to its size, location, and the lack of comparable properties.
Our familiarity with the area—already a popular tourist hotspot—gave us confidence in the deal.
The broker required a £1.1 million refinancing package, which included funds to develop a 19th-century church in Kinloch—the couple’s planned new family home. The borrowers also wanted the flexibility to amortise the interest on the loan with overpayments from their substantial rental income from the mill.
One emerging challenge was that the rental property did not yet have a holiday let licence. Under Scottish licensing regulations, lenders may not finance a holiday let before the issuance of a licence, as the property cannot legally be rented out until this is in place.
To ensure a solution, we structured the loan so that funds would be released upon the issuance of the licence, allowing the case to progress smoothly.
Supporting brokers through challenging deals
Rather than making it harder to complete deals, we continue to take a ‘relationship-first’ approach to lending, underpinned by our ‘kinder banking’ ethos. When cases become complex, we believe in offering more support to broker partners, not less, and via real people.
By providing flexible underwriting, a deep understanding of the holiday let market and a willingness to assess each case individually, we help brokers and their clients secure the right solutions, even in an evolving landscape.
By Grant Seaton, Head of Intermediary Lending at Cumberland.
For more informationon on our Holiday Let offering at The Cumberland, please click here.
For more information on Old Grain Mill, please click here.