It’s an unprecedented situation that’s thrown the nation into chaos and had a catastrophic effect on the economy. With travel bans in place and strict social distancing measures, it’s inevitable that Covid 19 has impacted the holiday letting industry.
In this article, we’re looking into the effect of Covid 19 – exploring how it has changed the landscape of holiday letting, and its influence on mortgages.
When the UK went into lockdown, the travel ban resulted in holidays either being postponed to a later date or cancelled completely. So, how has this changed the industry and what does the future hold?
Some people will have received a refund, as is the case with bookings through Airbnb. According to the website, ‘Reservations for stays and Airbnb Experiences made on or before 14 March 2020, with a check-in date between 14 March 2020 and 31 May 2020, are covered by the policy and may be cancelled before check-in. Airbnb will either refund or issue travel credit that includes all service fees for covered cancellations.’
Other people will have been given a monetary voucher that can be used for a future getaway; a solution which prevents loss of income for the holiday let owner.
The future of UK holidays
There’s expected to be a significant increase in UK holiday home bookings once the lockdown restrictions have been lifted. There are various reasons for this, the most obvious being that many people will simply want a holiday after months of being confined to their homes!
It’s also the case that people will likely be nervous about travelling abroad in such uncertain times. There will be a fear about a second wave of Covid 19, which could heighten the chance of being stranded in another country if further travel restrictions are introduced. You’ll also find people who are scared of catching the virus, if the reliability of the country’s health system isn’t clear.
Protection for holiday let owners
Those who run a holiday let business, own a second property, and are eligible for small business rates relief may be able to claim a grant in the light of Covid 19. According to HMRC, ‘Under the Small Business Grant Fund (SBGF) all eligible businesses in England in receipt of either Small Business Rates Relief (SBRR) or Rural Rates Relief (RRR) in the business rates system will be eligible for a payment of £10,000.’
For those who think they’re qualified, HMRC adds that, ‘The schemes will be delivered by local authorities – if you are eligible, your local authority will be in touch with you to arrange payment.’
Considering the above factors, it can be noted that although the short-term impact has been negative with bookings cancelled or postponed, there is a positive future for the holiday letting industry. A boom in UK holidays signals that things will improve after the Covid 19 pandemic, while compensation from the government offers some relief for holiday let owners.
Holiday Let Mortgages
It’s not just those already part of the holiday letting industry who have been affected by Covid 19; people hoping to buy a property and begin the mortgage application process will also have felt the change.
Availability of mortgage products
The UK lockdown announcement saw a mass pulling of mortgage products. The main reason for this is the lack of resources for prospective clients. With a surge in requests for mortgage holidays, staff are having to deal with existing customers, rather than welcoming new ones.
It also makes sense that, due to the restrictions on UK travel, lenders aren’t offering holiday let mortgages. They won’t sell a product when holiday homes aren’t generating any revenue; they require security to allow for lending and in the current climate, this isn’t possible.
Holiday let owners will have the opportunity to apply for a mortgage holiday. However, these should be approached with caution. If you’re not making any mortgage payments, the interest rates on the remaining balance will rise and once the break is over, your monthly instalments will increase in value. Plus, you should be aware that taking a mortgage break could have a negative impact on your credit score.
In short, if you’re able to get by financially without taking a mortgage break, this would be a reasonable way forward.
Covid 19 has caused short-term limitations for getting a holiday home mortgage. However, mortgage products are expected to return to the market once the pandemic is over.
As we discussed previously, if the UK holiday letting industry sees a spike in bookings there will be great public demand for places to stay. As such, mortgage providers will be reassured that holiday homes are secure enough to lend to; with all the necessary potential to get bookings and make a profit, the owner should be able to keep up their monthly payments.
There is light at the end of the tunnel. Time to get ready …At HCM, we believe that those who have finalised their holiday let purchases and have the property properly furnished and photographed, will be in prime position when the lockdown finishes. It will be those people who will be best placed to profit from the resurgence in holiday letting.