Holiday let mortgages, underwritten on letting income rather than AST rent.

The holiday let lender pool: smaller, and differently shaped

A holiday let cannot be financed on a standard buy-to-let mortgage. BTL mortgage conditions require an assured shorthold tenancy of at least 6 months; nightly and weekly lettings breach them outright, and lenders do check listings platforms. So the product lives with a dedicated pool, perhaps 25 to 30 active lenders as of June 2026, with a shape unlike mainstream buy-to-let.

Regional building societies dominate the market, many with decades of holiday-let lending in their home tourist areas, and they underwrite manually, which suits the quirky stock (coastal cottages, conversions, annexes) that holiday lets tend to be. Around them sit a group of specialist buy-to-let lenders with short-term-let products, who bring higher maximum loans, limited company appetite and multi-property capacity. Criteria diverge widely on the points that matter: personal-use allowances, minimum personal income floors (commonly £20,000 to £40,000), whether Airbnb-style nightly letting is acceptable or only weekly bookings through an agency, and geography, since several lenders draw maps around oversupplied honeypots.

If you are weighing a holiday let against a conventional rental, start with our buy-to-let mortgage page for the AST comparison, and use the rental yield calculator to put both options on the same footing.

How lenders assess holiday let income

There is no AST rent to stress, so lenders substitute a letting projection from a recognised holiday-letting agency: a letter stating achievable weekly rates for the specific property in low, mid and high season. The standard method then averages the three seasonal rates and applies an assumed occupancy, most commonly 30 weeks a year, though some lenders use 28 and the most generous take 32 to 35 for proven performers.

So a cottage projected at £550 a week low season, £850 mid and £1,250 high is assessed at the average of £883 a week, times 30 weeks: £26,500 of assessable annual income. That figure then runs through an interest cover ratio of typically 125% to 145% at the lender’s stress rate, exactly as a BTL rent would. For remortgages of trading holiday lets, 1 to 2 years of actual booking income usually replaces or supplements the projection, and strong actuals beat projections every time.

Top-slicing matters more here than anywhere else in landlord lending. Because seasonal income is lumpy and projections are conservative, many holiday-let lenders will use surplus personal income to bridge an ICR shortfall, particularly the building societies. A borrower with £60,000 of employment income can often support a loan the projection alone would not, which keeps marginal coastal purchases alive at 75% LTV.

The post-FHL tax position: what April 2025 actually changed

The furnished holiday lettings (FHL) tax regime was abolished from April 2025. Holiday lets are now taxed like any other residential letting business, and four privileges went with the regime:

• Capital allowances on furniture, white goods and equipment are gone for new expenditure; replacement-of-domestic-items relief applies instead, as for ASTs.
• Full mortgage interest deduction for individual owners is gone. Interest now gets the same 20% tax credit as any personal-name rental, a real cost increase for higher-rate taxpayers.
• Pension-relevant earnings treatment is gone. Holiday-let profits no longer count towards pension contribution limits.
• The capital gains reliefs, business asset disposal relief at 10% to 14%, rollover relief and gift holdover relief, no longer apply to disposals of holiday-let property.

None of this changed the lending market: lenders never priced the tax breaks, and rates and criteria carried straight through. What it changed is the ownership maths. With interest relief restricted for individuals, the limited company wrapper, where interest remains fully deductible against corporation tax, has moved from optional to default for new higher-rate purchasers. See our limited company buy-to-let page for how the SPV structure works; the same mechanics apply, with SIC codes adjusted for short-term letting. We arrange the finance and do not give tax advice, so have an accountant run your specific position.

Occupancy restrictions and planning: check before you buy

Short-term letting is under active planning restriction in parts of the UK, and lenders track it closely because an unlawful use is unmortgageable. The current landscape, as of June 2026:

• Wales has a dedicated planning use class for short-term lets, and councils in pressured areas can require planning permission to switch a dwelling into holiday use. Several North and West Wales authorities apply it.
• Scotland requires a short-term-let licence for every operator, with some cities also designating control areas where planning permission is needed on top.
• England restricts by locality rather than nationally: Article 4 directions and principal-residence planning conditions in tourist hotspots limit new short-term lets, and a registration scheme for short-term lets is in rollout. In London, the 90-night annual cap on short-term letting of dwellings still applies.
• Holiday-occupancy conditions on the property itself, common on purpose-built holiday parks and some rural conversions, restrict occupation to holiday use only (sometimes with closed winter months). These cut the lender pool sharply and the achievable LTV with it, because the resale market is restricted to other holiday operators.

None of these are deal-killers if identified early. All of them are expensive surprises at valuation if not.

Holiday let mortgage rates as of June 2026

Indicative ranges across the holiday-let panel, as of June 2026. The spread is wide because building society pricing at low LTV is keen while specialist limited company products at 75% carry a premium.

The 30 to 75 basis point premium over standard buy-to-let buys you the right to let nightly, use the property yourself and earn seasonal rates that commonly run 1.5 to 2.5 times the equivalent AST rent. Whether that trade works depends entirely on the occupancy your location can actually deliver.

Worked example: coastal cottage purchase through an SPV

A limited company buys a 3-bed cottage in a south-west coastal town for £400,000 to operate as a holiday let through a local agency.

Note the gap between the lender’s conservative 30-week assessment and trading reality: the deal is underwritten on £26,500 but lives or dies on whether the operator can beat it. The cash margin on holiday lets is in the operating line, not the mortgage line, which is also why portfolio landlords increasingly run one or two holiday lets alongside AST stock rather than building whole books of them.