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Brokers expect rise in demand for holiday let loans

The vast majority (85%) of mortgage brokers expect an increase in demand for holiday let loans, Cambridge & Counties Bank has found.

Of this, 29% expect a significant rise.

Meanwhile, around one in 10 (11%) expect demand to stay flat and just 2% expect a fall in demand.

Simon Lindley, chief development officer at Cambridge & Counties Bank, said: “The UK is very likely to become a much more attractive holiday destination and one result is an expected boom in demand for quality UK holiday lets.

“The specialist lending market for this sector has historically been underserved but Cambridge & Counties Bank is focussed on leading the market and we firmly believe our product provides a dedicated solution in the UK.”

On average, brokers expect lending volumes to grow 11% over the next 12 months with 5% of mortgage brokers predicting volumes will increase by more than 15%.

The key reason given for the rise in demand from property investors for UK holiday lets was a direct consequence of Brexit and the fall in the value of the pound favouring UK holidays, as cited by 45% of brokers.

Other reasons included the favourable taxation for holiday properties (41%); an expected rise in UK holidaymakers choosing UK holidays over the foreign trips (40%); and an expected rise in tourists looking for UK holidays (37%).

Nearly three in 10 (29%) said that better yields from holiday lets versus traditional buy-to-lets was a key driver of growth.

However, almost half (45%) of brokers said that the market in lending products designed specifically to cater for holiday let investors was “under competitive” and ripe for new entrants.

Almost two thirds said products need to be tailored more for their specific needs and 26% found there is little differentiation in the market.

To further boost lending in the sector, two thirds of mortgage brokers (66%) said products should be made available for larger portfolios and borrowings.

In addition, two fifths of brokers said that mortgage terms should be lengthened whilst 31% said income criteria should be relaxed.

By Michael Lloyd

Source: Mortgage Introducer

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Brokers call for innovation around short-term lets

More landlords are looking at short-term and holiday lets and lenders have to match this interest with more innovation, brokers have claimed.

Andrew Montlake, director at Coreco, said few lenders would place holiday let cases, but Airbnb is a bit more complex and lenders are more selective.

He added other than rates, it’s location and short-term lets that landlords are looking for.

Montlake said: “There has to be more innovation around Airbnb and how lenders deal with that because that’s something a lot of portfolio landlords are doing with at least part of their portfolio.”

Michael Lawlor, business principal of Mortgage Advice Bureau in Finchley, added: “We’re getting more of these enquires, they’re very difficult to place and we’d like to see more options for landlords.

“I’m getting more enquiries for Airbnb than I’ve ever had so it’d be great if some other lenders joined that market to give more option to our clients.”

Adam Kasamun, associate director at LDNfinance, said if there are restrictions saying it has to be a holiday let then many lenders will not do it.

He said: “I think for people (landlords) to diversify they have to be able to take risks as well.

“HMO can be quite risky and there is a lot of regulation around it and with holiday lets, not many people want to do it.

“Airbnb, we know about that. It’s about maybe landlords being ahead of the curve.

“The limited company thing is a lot more mainstream than it was four, five years ago.

“More people are aware of it but the people who did it four, five years ago are seeing the benefits of it now because they were ahead of it. Do it now and you can make more from it.”

Jeff Knight, director of marketing at Foundation Home Loans, said that Foundation underwriters short-term let buy-to-lets in the same way as normal buy-to-let cases.

He added: “The only difference is that we do not ask for an AST (Assured Short Term Tenancy Agreement).

“By underwriting these in the same way gives the landlord the flexibility to revert to normal letting should they require to do so, giving fair customer outcomes.

“Having undertaken some landlord focus groups recently, I can say that this market will grow, albeit it will still be very much a niche area, as it gives portfolio landlords in particular opportunities to diversify their portfolios.”

By Michael Lloyd

Source: Mortgage Introducer

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Holiday lets generate highest returns in UK property market

Holiday lets are among the highest returning assets within the UK real estate sector, according to research from holiday property fund Second Estates.

Yields from holiday properties were 1.1 percentage points higher than those for residential buy-to-let properties over the last 12 months, and higher than all other major categories, according to the property group’s study.

The average weekly income for a holiday letting was £563 last year, compared to just £191 for an average buy-to-let residential property. Even when taking into account the off-season weeks, holiday lets generate nearly three times more income than residential buy to let properties.

The lettings data shows holiday lets generated an average net yield of 6.1 per cent over the last year. The next highest property asset class was student accommodation with a net yield of 5.25 per cent.

Meanwhile, the data showed that holiday lets are forecast to outperform other asset classes with an average total return of 9.3 per cent over the next five years.

Commenting on the data, Alistair Malins, CEO of Second Estates, said: “This research demonstrates the strength of the UK holiday property market as an emerging alternative asset class.”

Second Estate pointed to the strong increase in UK tourism, which has seen an increase of seven per cent last year, which is having a positive impact on UK holiday accommodation.

There are close to two million buy-to-let landlords in the UK, of which and an estimated 165,000 homes listed as holiday lets.

Source: City A.M.