Holiday Let Mortgages: How Lenders Assess Them

How a holiday let mortgage differs from buy-to-let

A standard buy-to-let mortgage is built around an assured shorthold tenancy (AST): one household, a fixed-term agreement, predictable monthly rent. A holiday let has none of that — income arrives in short stays, fluctuates with the seasons and depends on marketing, reviews and weather. Letting holiday guests stay in a property on a standard buy-to-let mortgage breaches the mortgage conditions, so a dedicated holiday let mortgage is required.

It is a smaller market than mainstream buy-to-let, served largely by building societies and specialist lenders — names commonly active at the time of writing include Leeds Building Society, Cumberland, Furness, Suffolk, Hodge and Harpenden, though ranges change regularly. If you are new to rental lending generally, our guide to buy-to-let mortgage affordability explains the underlying interest coverage machinery that holiday let lenders adapt.

The same logic applies to property you already own. A second home on a residential second-home mortgage cannot simply be put on a booking platform — that is commercial use the mortgage does not permit, and a consent-to-let arrangement (designed for AST tenancies) does not cover short stays either. The clean route is to remortgage onto a holiday let product, which converts the property to the right footing and is assessed on the seasonal income basis described below.

How lenders work out the income

With no AST rent to point to, lenders build a notional income figure from seasonal letting rates. The standard approach: a holiday letting agency provides a letter projecting the weekly rate the property would achieve in low, mid and high season. The lender averages the three figures and commonly assumes around 30 weeks of occupancy a year. That annualised figure is then put through an interest coverage ratio (ICR) test — commonly 125-145% of the mortgage payment at a stressed rate of around 5-5.5%.

Two things strengthen the income case. The first is the agency letter itself: lenders want it from an established holiday letting agency familiar with the local market, not a generic online estimate, so line one up early. The second is trading history — if the property has operated as a holiday let before, a year or two of actual booking accounts usually beats projections, and some lenders will lend against demonstrated income where they would discount a forecast.

Approaches vary — some lenders assess against a notional AST rent instead, and some lend primarily against your personal income — so the same property can support quite different loans across the market. Our buy-to-let mortgage calculator is a useful starting point for the rental maths.

Deposit, income floors and portfolio limits

Because the income is seasonal and discretionary — holidays are the first thing households cut in a downturn — lenders build in extra caution beyond the 30-week assumption:

Deposit: commonly 25-30%, slightly more than standard buy-to-let, with the best rates at lower loan-to-values.

Minimum personal income: floors are common, often somewhere between £20,000 and £40,000 depending on the lender — the off-season months have to be covered from somewhere, and lenders want to see it.

Portfolio limits: many lenders cap the number of holiday lets they will fund per borrower (or in total exposure), so investors building a portfolio of several holiday properties tend to outgrow individual lenders and need to spread across the market.

Tax: the FHL regime has been abolished

For decades, holiday lets enjoyed a privileged tax position under the furnished holiday lettings (FHL) regime: full mortgage interest relief, capital allowances on furniture and equipment, and access to capital gains tax business reliefs on sale. That regime was abolished from April 2025.

Holiday lets are now taxed like any other property income. The practical consequences for a property held in your personal name: mortgage interest relief is restricted to a 20% basic-rate credit (the same Section 24 treatment as ordinary buy-to-let), capital allowances are no longer available on new expenditure, and the favourable CGT business reliefs no longer apply to disposals. A business plan written around the old FHL advantages needs redoing from scratch.

The change also reshapes the personal-versus-company question: with full interest deductibility gone in personal names, the limited company route — where interest remains a deductible business expense — has become more relevant for higher-rate taxpayers. Our guide to limited company vs personal ownership walks through that trade-off. Either way, take proper tax advice before buying — the rules here have moved a lot in a short time.

Personal use, Airbnb and planning restrictions

Staying there yourself. Most holiday let lenders permit some owner occupancy — typically a capped number of weeks per year — provided the property is genuinely run as a commercial holiday let rather than a second home with occasional guests. Limits vary by lender, and every peak week you use yourself is a peak week you cannot sell.

Airbnb-style letting vs a dedicated holiday let. Listing a property casually on Airbnb is not the same thing as running a holiday let in a lender's eyes. Dedicated holiday let products assume a furnished property marketed for short stays, usually through an agency that can evidence the seasonal rates. Occasional short-letting of a home or buy-to-let usually breaches the existing mortgage conditions instead — if short-stay income is the plan, get the right product from the start.

Planning and local rules. Some areas restrict short-term letting: London has a 90-night-per-year limit on short lets of homes, Scotland requires short-term let licensing, and Wales has its own licensing and planning measures — so check the local position before you buy.

Seasonality, agency fees and cashflow

The mortgage is monthly; the income is not. A coastal property might earn most of its annual revenue between May and September, then trickle through the winter. Sensible holiday let owners run the business on an annual budget, holding back summer surpluses to cover winter payments, insurance renewals and the repairs-and-refresh work that short-stay properties need far more often than tenanted ones.

Agency and platform costs are the other big line: full-service holiday letting agencies commonly charge 15-25% of booking income for marketing, changeovers and guest management — roughly double a buy-to-let management fee. Add cleaning, linen, utilities (you pay them, not the guest), broadband, TV licensing and consumables, and the gap between gross bookings and net profit is wide. The headline weekly rates look spectacular next to monthly rents; the net position is usually closer than it first appears.

Two cost quirks work in the owner's favour, with conditions. A holiday let that is available to let and actually let for enough nights a year (in England, broadly available for 140 nights and let for 70) can be assessed for business rates instead of council tax, and many then qualify for small business rate relief — check the current thresholds, which differ in Wales and Scotland. Conversely, holiday accommodation is treated as a trading activity for VAT, so a large or multi-property operation whose turnover approaches the VAT registration threshold needs advice sooner than a buy-to-let landlord ever would.

Lender appetite, income methods, personal-use allowances and portfolio caps all differ meaningfully between the relatively few lenders in this market — so checking your figures across the whole market matters even more here than in mainstream buy-to-let.

Frequently asked questions

Last updated: June 2026