As we tiptoe towards the summer months, I’m sure I’m not the only one dreaming of a holiday, whether exotic or somewhere a little closer to home.
While the UK vaccine programme is offering hope that an overseas break may be on the cards for 2021, I imagine that a staycation of some kind also remains firmly on the agenda for many.
The staycation trend is looking increasingly likely to continue as our appreciation for the natural beauty and attractions of the UK grows. Lenders are also recognising this fact and an increasing number of doors are opening for those looking to invest in catering for these types of break. This was highlighted in data collated and released by Moneyfacts in early April, which showed that the number of holiday-let products available in the market had continued to rise since March 2020.
The analysis found 149 holiday-let products available from 21 lenders. This figure was higher than in October 2020, when there were 103 products available from 17 lenders, and than in August 2020, when 74 products were being offered across 14 lenders. Looking back to March 2020, there were more products available, at 160; however, fewer lenders (20) were offering products.
Despite the rise in availability of holiday lets, the average rate is said to have steadily risen since March, from 3.37% to 3.95% at the time of writing.
Spike in sales
This data came on the back of research from Hodge at the end of March, which outlined that sales of holiday homes near the coast had surged over the previous six months.
The most popular destination for holiday-let buyers was the Southwest at 39%, followed by Wales at 19% and the Northwest at 12%. Welsh purchases have almost doubled since September 2020, increasing from 10%, with coastlines around the north, including Pwllheli, Holyhead and Llandudno, proving hugely popular for holiday homes. Hodge customers were said to be willing to spend an average of £403,143 on a holiday home — nearly two-thirds higher than the average UK house price of £252,000.
Financing choices
Of those purchasing a holiday home, 35% had remortgaged their existing home to finance it, while 65% had taken out a new holiday-let specific mortgage. The data also showed the average age of a holiday-let mortgage customer to be 51.
This is an interesting market to follow and, while the building society sector appears to be leading the way from a product perspective, I fully expect competition to intensify in the coming months.
However, there is an important caveat for investors: this is not a sector that should be entered lightly. Alongside a significant amount of research and due diligence, the value of good, professional advice can prove key when building, adding to or restructuring any portfolio.
Ying Tan is founder and chief executive of Dynamo
