Lisa Martin is development director of TMA

One of the few good things to come out of the pandemic has been the resurgence of the UK’s domestic tourism industry. Forced or strongly encouraged by travel restrictions to take staycations, Brits have been rediscovering the many wonderful places to enjoy a holiday in the UK, from Shetland to the Isles of Scilly.

That has been very good news for the owners of holiday lets. Research commissioned by Sykes Holiday Cottages during the first half of 2021 suggested that in 2019, before the pandemic staycation boom, the average annual income from owning a holiday let was £21,000. But that average – and the much higher sums at the top end of the market – is likely to be even greater now.

The sector is currently booming, with the number of people looking to become holiday let landlords growing still. This market clearly offers significant opportunities for mortgage brokers with the knowledge and skills to support clients in this area.

Rife with opportunity

In July 2021, Hamptons International reported 1,404 new incorporations of holiday let companies between January and June 2021. That’s a 119% increase compared to H1 2019, and 93% of these new incorporations were for a single mortgaged property.

The mortgage industry has responded too, with the number of holiday buy-to-let (BTL) mortgages more than doubling between August 2020 and September 2021, when there were 186 deals offered by 25 lenders according to Moneyfacts.

Working with the right network or club can ensure brokers make the most of this booming market. Some will offer exclusive deals and partnerships with lenders, helping members secure the most appropriate deal for their clients and stand out against the competition.

Market knowledge

To make the most of opportunities in this area, brokers must first have a comprehensive and detailed knowledge of the key issues related to holiday buy-to-let (BTL) mortgages and the range of available products to support clients during product selection and application.

Finding the right deal could make a huge difference to the income that a holiday BTL landlord earns, so it is essential that the broker can identify the best possible match for the client’s requirements.

As mentioned above, a great way to do this is through membership of a mortgage club. As well as access to exclusive products and a wider choice of the best deals, membership of a mortgage club also gives brokers opportunities to track market developments and learn how to keep improving their service to clients.

It’s not all about new clients either. As most brokers know, capitalising on existing relationships is a great way to win business. Clients who already own BTL properties may be in a position to benefit from buying new properties or by converting long-term lets into holiday lets, or others could want to turn a second home into a holiday let.

By having an in-depth knowledge of the market and upcoming trends, brokers can proactively contact these clients to gauge their interest and offer them products suitable for their needs.

Complex rules

Holiday BTL mortgages can be complex, and clubs can support advisers to help their clients understand the tax implications associated with these products.

Differences can include the need to pay higher levels of stamp duty in England and Northern Ireland, Land Transaction Tax in Wales and Land and Buildings Transaction Tax in Scotland.

In addition, because a holiday let is classified by HMRC as a business, not an investment, expenses related to furnishing the property and mortgage interest may be tax deductible; and clients may be eligible for business rates relief as well as Capital Gains Tax relief (when selling the property).

A good club will offer training and support in this area to ensure members are empowered to advise their clients. However, it’s important the client also seeks expert advice from a qualified tax adviser. Brokers should consider sourcing a good referral partner who can offer this tax advice.

This small but increasingly valuable segment of the BTL market is evolving quickly. It offers brokers multiple opportunities, including the chance to specialise in niches related to specific types of holiday BTL mortgages.

With the staycation trend set to continue for the foreseeable future, brokers can work with their mortgage club to ensure they have the right support and expansive access to the best products to ensure they secure the best deal for their clients