"Following a boom in the sector during the Covid-19 pandemic, many holiday let owners are having to keep pace with legislative changes ensuring they keep their investment viable."
The holiday let market has had more ups and downs than a roller coaster at Thorpe Park in the past five years. It was all plain sailing until the pandemic hit and we all went staycation mad and demand went through the roof. Now this has levelled off we have concerns from locals about the high density of holiday lets in certain areas, leading to the Chancellor abolishing the business rate relief for furnished holiday lets in his recent Spring budget.
Holiday let underwriting has always been a step away from the norm, even compared to other specialist and complex income products. With affordability based on the property itself rather than the personal income of the applicant (and with no minimum personal income requirement at all), it’s common to see larger loan sizes secured on properties which are more often than not hugely characterful and/or situated in unusual or remote locations.
In fact, location in particular is something which continues to prove build in interest in today’s holiday buy-to-let market. At Hodge, we’ve continued to receive a whole range of applications for properties in city, coastal and rural areas in recent years, likely reflective of the many different ways in which UK consumers now use holiday lets for both work and leisure. And this will no doubt change again due to the alterations to council tax costs for second homes, as well as the changes to the business rate relief too.
Work trips are more often mixed with leisure, as the standard ‘office hours’ society used to abide by continue to fall away. We now live in a world where an organisation based in one city can have staff working in areas hundreds of miles away, so temporary accommodation becomes a more attractive proposition for organisations looking to meet with its staff periodically throughout the year.
Similarly, consumers with a diminished sense of financial wellbeing in the current economic climate continue to focus on the UK market for their holidays, and these are just a few of the changing trends we’ve seen in recent years within the market.
Following a boom in the sector during the Covid-19 pandemic, many holiday let owners are having to keep pace with legislative changes ensuring they keep their investment viable. At Hodge, we’re working hard to help investors who wish to occasionally use their properties while also maximising returns by offering short-terms rentals via sites such as AirBnB.
We’ve also reduced the amount of documentation requirements to help keep a light touch to the application process throughout, showing confidence in the self-funding nature of the propositions we receive and starting all underwriting assessments with a ‘yes’ - only changing this attitude as and when it is absolutely needed to do so.
At Hodge, to help the borrowers we’re working with continue to feel confident and secure in the commitment they’re making, we’ve also enhanced the criteria on our holiday let products to accommodate debt consolidation and larger loan sizes, and leant on the expertise of our own in-house property team to provide further insight and feedback too.
This can be particularly useful in supporting applicants where the property involved is more quirky or unusual, and in getting guidance on location around local hotspots and licensing issues, for example. It has also helped us as underwriters with our ‘yes first’ attitude and to further our holistic view on evaluating applications.
When it comes to affordability, we are assessing this on a 30-week period basis to ensure there is sufficient headroom and continuing to monitor current and proposed regulatory and licensing developments to ensure we are continuing to meet the needs of holiday let investors in a responsible way too.
This is because, as underwriters, we recognise that in spite of the changes experienced by those operating in the holiday let market since the pandemic came to an end, many of the factors which encouraged them to enter it in the first place are still present today. There are still many UK holidaymakers, not to mention professionally-focused consumers, wanting an
alternative to foreign travel and the potential for a decent return on short-term rentals to be made in the process – provided holiday let owners have the right tools at their disposal to roll with the ever increasing changes in the process.
