Holiday Let Mortgage Trends to Watch in 2026

(Why the year ahead looks promising for savvy investors)

Holiday letting continues to be one of the UK’s most resilient property sectors. Whether you’re buying your first holiday home or expanding a growing portfolio, 2026 is shaping up to be a year full of opportunity. Tax changes, lender criteria, and local regulations are evolving—but these shifts create advantages for well-prepared investors.

In this guide, we explore the 2026 holiday let mortgage landscape, including lender trends, borrowing terms, remortgage opportunities, and practical tips to make the most of your investment.

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1. A brighter backdrop for holiday let borrowing

The macro picture for 2026 is encouraging, particularly for investors who plan ahead.

Interest rates and affordability

After several years of rate rises, many current forecasts suggest rates may continue to ease in 2026, subject to the usual “the world has changed again” caveat. Even modest reductions can:

• Improve monthly cash flow and net operating yields
• Enhance affordability for new purchases or portfolio expansions by improving the Interest Cover Ratio (ICR) calculation
• Make remortgaging more attractive for existing owners who are coming to the end of their 2 or 5 year rates

Timing is crucial: starting conversations with lenders or brokers early can help you secure the most competitive rates.

During the mortgage application process, if rates continue to drop, some lenders allow you to seamlessly switch over to the lower rate so long as your application has not been submitted.

Resilient UK holiday let tourism

Domestic holiday let tourism remains strong, with more families and couples choosing UK stays over overseas travel. Coastal, countryside, and lakeside locations are seeing consistent bookings, reassuring lenders that rental income projections are realistic.

Joby Mussell, Chief Commercial Officer at Holiday Cottages, noted: “Current demand for our holiday lets is strong, with bookings taken through June, July and August up 14% year on year, whilst the full year, taking into account the off-peak months, is up 4% year on year.”

Tom Burdett, Director of StayCotswold, said that demand for bookings is higher than ever, “With annual bookings to the end of July 2025 13% ahead of the same period last year.”

Market maturity and opportunity

Being a mature market, many “easy-win” properties have already been bought, but changes in the second home market have produced a fresh supply of superb holiday let properties, many of which have been held by the same family for many years. This presents new opportunities for holiday let investors to focus on quality, differentiation, and operational excellence—factors that lenders increasingly reward. A well-managed property in a good location now carries strong appeal.

Planning and regulatory changes

Some councils are tightening short-term let regulations, most notably in Wales, but this is an opportunity for smart investors. Properties in areas with clear, predictable regulations should present no issues – The Cotswolds, for example, a huge five-county area, have stated that they value short term let tourism and they have no plans to limit holiday lets. Furthermore, areas previously overlooked by investors, such as Northumberland, can offer higher yields with fewer bureaucratic hurdles.

Tip: For more on planning and tax considerations, see our guide on:

• Understanding holiday let stamp duty
• 2024 Budget impact on holiday lets
• Planning rules for holiday lets

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2. Holiday let mortgage trends in 2026

2.1 Specialist lenders lead the way

Most mainstream banks remain cautious, while specialist lenders – building societies and niche providers like Hodge, Cumberland, Monmouthshire and Newbury – are confident in lending against seasonal income. They like holiday let lending, as from their point of view the property tends to be of a high quality, the applicants tend to be of a high quality and the level of arrears and defaults is almost zero. It’s a good business to be in!

Expect in 2026:

• New products targeting emerging regions or hybrid letting models (think a holiday let mortgage that allows a switch to Buy-to-Let mid-term)
• Competitive rates for seasoned investors or well-prepared applicants
• Flexible ownership structures, including more Limited Company interest-only options to maximise tax advantages and cash flow

2.2 Smarter underwriting

Lenders are increasingly data-driven and AI will soon be playing a key role. Successful borrowers will provide:

• Verified rental forecasts from recognised letting agents
• 2–3 years of occupancy and income data where possible (if doing a remortgage)
• Evidence of personal “earned” income backing for first-time purchases

2.3 Regional differentiation

Lenders classify properties by demand and risk:

1. High-demand hotspots – strong LTV potential, but with strict stress tests
2. Secondary or emerging areas – lower competition, higher growth potential
3. Rural or remote locations – conservative lending, higher deposit requirements, but strong margin opportunities. This is especially true in Scotland

For help comparing lenders and products, see our holiday let mortgage lender guide.

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3. Typical mortgage terms in 2026

Mortgage Factor	Typical 2026 Range	Why This Can Work in Your Favour
Deposit required	20% – 25%	Strong equity secures better rates and long-term stability. Better deals at 60% or less
Loan-to-value (LTV)	60% – 80%	Although 75% remains the most common.
Repayment style	Interest-only or repayment	Interest-only boosts cash flow by keeping committed costs low.
Term lengths	15 – 25 years	Longer terms provide flexibility and manage seasonal cash flow for repayment style mortgages.
Arrangement & valuation fees	Higher than standard buy-to-let	Specialist products cost more but match the property’s risk profile.
ICR Stress testing	145% @ payrate or payrate +2%	Five years deals tend to be cheaper.
Occupancy assumptions	30 weeks x average of high, medium, low weekly rate	Exceeding these expectations strengthens lender confidence.

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4. Opportunities for investors in 2026

Refinancing wave

Many borrowers from the 2021–2022 boom are reaching the end of fixed deals. Lenders are eager to win this business, creating excellent opportunities for:

• Competitive rates on remortgages
• Switching to interest-only or mixed repayment products
• Securing better LTV or term options

Hidden gems and emerging regions

• Lower purchase prices due to current prevailing market conditions and the pressure from selling second homes
• Higher initial yields due to lowering rates
• Mixed regulatory pressure and possibly some easing of previous restrictions (again, note how Wales has back-tracked on some of its rulings on second homes)
• Growth potential as tourism spreads, especially towards the North East

Professionalisation and lender confidence

Lenders value well-run properties in good condition, ready to let on Day One. Reliable cleaning, bookings, and guest management with a reputable agency like www.holidaycottages.co.uk reduce perceived risk, which can translate to:

• Easier approvals
• More competitive rates
• Greater repayment flexibility

SPV / Ltd company structures

More lenders are crafting and launching corporate ownership products. At the time of writing Cambridge Building Society has just launched a LTD Buy to Let range. These products suit seasoned holiday let investors and are not for everyone (read more about this here) but can provide:

• Tax efficiency
• Easier portfolio expansion
• Access to lenders willing to fund multiple properties

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5. Practical tips to succeed in 2026

1. Start early – Engage brokers and lenders before peak remortgage season.
2. Build a strong case – Include verified forecasts and detailed expense plans.
3. Pick locations wisely – Balance demand, growth potential, and regulation.
4. Use SPV/Ltd structures if it suits you – Scale more efficiently and access better products.
5. Stress-test your finance model – Prepare for lower occupancy and rising rates.
6. Maintain a beautiful property to get solid guest satisfaction – Reviews and occupancy are key to lender confidence.
7. Diversify your portfolio – Spread risk across properties and regions.
8. Monitor local regulation – Avoid surprises with planning or licensing rules.
9. Stay on top of refinancing opportunities – Lock in better rates before competitors.
10. Think long-term – Smart planning now delivers stronger returns in the years ahead.

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6. Case studies

Scenario 1: First-time buyer of a holiday let property

• New to holiday letting, purchasing in a suitable growing rural region
• 25% deposit, 75% LTV, interest only to keep committed cash flow to a minimum, usually on a two-year fixed initial period, providing stability and the option to exit or change the property usage (or sell it) if it’s not going to plan
• Property performance carefully reviewed over the first 2 years, enabling refinancing and expansion if successful

Scenario 2: Seasoned holiday let investor

• Established holiday let property, strong occupancy, great reviews – knows how the industry works!
• Likely 60–75% LTV, still interest-only but now utilising the 10% repayment option to start reducing the loan balance over time. The long-term objective being mortgage free
• Typically remortgaging onto a 5-year fixed rate, as they know the property, they know the village and have confidence in its longer-term performance

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7. Why 2026 is the year to act

• Lenders are offering more tailored holiday let mortgage products
• Strong domestic tourism underpins income stability
• Emerging regions and professional operations offer growth potential
• Strategic planning and preparation give investors a clear advantage

Next step: To explore your options and see which mortgage suits your holiday let plans, create an account with us and spend 5 mins telling us about your plans and then speak to one of our specialist brokers today.