What Is a Holiday Let Mortgage?
A holiday let mortgage is a specialist product for properties let on a short-term basis to holidaymakers rather than on a standard assured shorthold tenancy (AST). This includes properties marketed through Airbnb, Sykes, Cottages.com, and similar platforms, as well as properties let directly to holiday guests. Holiday let mortgages are not the same as standard buy-to-let mortgages - lenders assess income differently, stress test on different criteria, and a distinct product panel applies.
Furnished Holiday Let (FHL) - The Tax Framework
A furnished holiday let (FHL) that meets HMRC's qualifying criteria receives different tax treatment from standard BTL property. The qualifying criteria are: the property must be available to let for at least 210 days per year; it must actually be let for at least 105 days; and no single let can exceed 31 consecutive days (for the majority of lets). Properties meeting these criteria can claim capital allowances, Business Property Relief for IHT purposes, and profit is treated as 'relevant earnings' for pension contribution purposes.
Holiday let lenders typically require confirmation that the property is intended to be let as an FHL - this affects both the income assessment and the product eligibility. Some lenders specifically require FHL status; others will accept short-term lets without FHL confirmation.
How Income Is Assessed for Holiday Let Mortgages
Holiday let income assessment differs fundamentally from standard BTL. Rather than a single AST rental figure, lenders use an annualised projected income figure - the property's expected annual gross rental income based on its occupancy potential and applicable nightly rate. This projection comes from a specialist holiday let agent's rental assessment or an ARLA-certified letting report.
Lenders do not use actual current bookings as the primary income basis - they assess the letting potential of the property itself. A new purchase with no booking history can still be underwritten on the basis of a professional letting assessment. This approach means the mortgage underwriting is based on what the property should earn, not what it currently earns.
Airbnb and Short-Term Let Platforms
The growth of Airbnb, VRBO, and similar platforms has driven significant growth in the holiday let mortgage market. Most specialist holiday let lenders accept Airbnb as a letting platform, though they assess income on the same projected annual figure as any other holiday letting arrangement rather than on the Airbnb dashboard's actual bookings. Some lenders cap the proportion of a property's revenue that can come from a single platform - a conservative measure against platform policy changes.
LTV and Rates
Most holiday let lenders cap lending at 75% LTV, with the widest choice of products available at lower loan-to-values. Indicative rate ranges by LTV band are shown below.
| LTV | Typical Rate Range | Notes |
|---|---|---|
| 65% LTV | from 4.50% | Widest holiday let lender options |
| 70% LTV | from 4.65% | Good range of specialist products |
| 75% LTV | from 4.85% | Some specialist lenders; fewer options than BTL |
| Above 75% | Very limited | Most holiday let lenders cap at 75% LTV |
Eligibility for Holiday Let Mortgages
Holiday let lenders apply criteria that reflect the seasonal and short-term nature of the income. Typical requirements include:
- Property in a location with demonstrable holiday let demand (coastal, rural, city centre)
- Property must be appropriate for short-term holiday occupation - furnished, with suitable facilities
- Projected annual holiday let income must pass the lender's ICR test - typically 125-145% of stressed interest at 5.5%
- Most lenders require minimum personal income of £25,000 per annum from the applicant
- Property must not be the applicant's main residence
- Some lenders restrict by region - coastal and rural holiday destinations most widely accepted