The Holiday Let Market, From a Lender’s Perspective

From cosy cabins in the Lake District, to coastal getaways in Devon, there’s still demand for domestic holidays post-COVID. But for those who own the properties, or for those looking to enter the market, it may seem to be in an interesting place, even with the advantage of having a “home away from home”. 

In April last year, the government abolished the Furnished Holiday Lettings (FHL) tax regime, getting rid of preferential treatment that had been in place for over four decades. Mortgage interest relief, capital gains concessions, capital allowances on furnishings are all gone. Add in a general mood of uncertainty around property investment, rising rates, and a changed stamp duty landscape for second properties, it doesn’t necessarily send the best postcard. 

But the underlying numbers tell a more interesting story. According to Sykes Holiday Cottages, January bookings are up 9% year-on-year, and that’s on top of bookings in 2025 being up 3% year-on-year. The demand is still there; instead, what's changed is who owns the properties, and how they're structured. 

Who's still open for business 

When the FHL regime changed, some investors left, and their exit has, in some respects, improved the quality of the borrower pool that remains. The landlords still operating holiday lets have done the maths under the new rules and decided it works, representing a shift to a different profile to the one lenders were dealing with three years ago. 

It's also worth noting what the Renters' Rights Act, which received Royal Assent in October 2025 and begins implementation from May, does and doesn't do. The Act abolishes assured shorthold tenancies and converts the entire private rented sector to periodic tenancies, removing Section 21 and significantly tightening possession rights for landlords. It's the most significant reform to residential letting since the Housing Act 1988. Holiday lets, however, fall entirely outside its remit, as they are not assured tenancies and are unaffected. At a time when some traditional buy-to-let landlords are reassessing whether they want to stay in a more regulated environment, the flexibility that comes with short-term letting is looking more attractive, not less. 

Checking in under a different name 

One of the clearest indications of how the market is adapting came in the weeks after the FHL abolition was announced, when searches for "buying a holiday let through a limited company" surged by over 700%. The logic is the same as what happened in buy-to-let following Section 24, if full mortgage interest relief is no longer available to individuals, operating through an SPV restores it. While it's not for every investor, it has become the default structure. 

The consequence for brokers is that a growing share of holiday let cases now arrive packaged as limited company applications rather than personal ones. That’s not new, but lenders who can handle that confidently and give brokers a straight answer on criteria (before they've done half the legwork) are the ones who will see the volume. We lend to both personal and limited company applicants, and our ICR structure is 145% for limited company borrowers and for personal applicants in the basic rate band, rising to 160% for higher rate taxpayers. Simple, consistent, and easy to work with. 

Low season, not no season 

It’s worth mentioning that one of the most common reasons for lenders shying away from holiday let cases isn't really the tax environment or the SPV structure, it's seasonal income. A property in the Lake District or the Peak District will generate stronger occupancy from spring to autumn than in winter. To an automated system, this is too high a hill to climb, but to a human underwriter who understands the market, it's a walk in the (national) park. 

An income projection from a letting agent, covering high, mid and low seasons, gives a far more reliable affordability picture than a rental coverage calculation alone. Most serious holiday let investors will have this documentation ready, so the lender's job is to know what to do with it and to look at the full financial picture, including the borrower's personal income, rather than relying on projected rental yield alone. That combination of personal income and well-evidenced rental projection usually makes for a stronger case than the headline numbers first suggest. 

It’s worth the trip 

Holiday let mortgages consistently sit among the lowest default and arrears rates of any mortgage category. The typical borrower profile is strong, the properties are generally well-maintained, and the underlying demand from a population that has shifted towards domestic tourism shows no sign of reversing. The post-FHL shakeout has, if anything, concentrated things. 

The lenders who are stepping back from this market are doing so because the cases look complicated. But complicated isn't the same as risky. It means the case needs reading properly, and that's precisely the kind of lending the Vernon was built to do, with personal underwriting, direct access to decision-makers, and criteria that brokers can work with, rather than work around.

For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.