Thinking about buying a holiday let in Wales? With its breathtaking coastline, vibrant towns, and year-round visitor appeal, Wales offers fantastic opportunities for those looking to invest in short-term rental properties.
Whether it’s a seaside cottage, a cosy countryside retreat, or a modern apartment, securing the right holiday let mortgage in Wales is key to making your investment a success. Understanding how holiday let mortgages work — from current rates and lender requirements to Welsh-specific regulations — will help you make confident, informed decisions and get the most from your Wales holiday let investment.
Continue reading on for our comprehensive guide on Wales holiday let mortgages…
What is a Holiday Let Mortgage?
A holiday let mortgage is a specialist loan designed for people who want to buy or refinance a property to rent out to short-term guests, such as those booking through Airbnb or Booking.com. It’s different from a standard residential mortgage (for your own home) or a buy-to-let mortgage (for long-term tenants) because it’s specifically for holiday accommodation that’s let out for days or weeks at a time.
Because income from holiday lets can fluctuate with the seasons, lenders view them as higher risk. This means they usually require a larger deposit—typically 25–40%—and proof that the expected rental income can comfortably cover the mortgage payments. Interest rates and fees can be higher, and many borrowers use specialist lenders like Principality or Monmouthshire Building Society.
Most lenders allow limited personal use of the property (often up to 60 days a year) but require it to be available for letting the rest of the time. The property must also meet certain standards, such as being of standard construction and in a recognised holiday area.
Using a holiday let mortgage ensures you comply with lending rules, have the correct insurance, and qualify for the right tax and business rate arrangements. It’s the proper and legal way to finance a property intended for short-term holiday rentals.
Key Recent Changes in Wales & What to Watch Out For
Recent changes to holiday let regulations in Wales have significantly impacted property owners, particularly those relying on business rates relief. Here’s an overview of the key developments and what prospective buyers and investors should be aware of:
Stricter Letting Criteria
As of April 2023, self-catering properties in Wales must:
- Be available to let for at least 252 days annually (up from 140).
- Be actually let for a minimum of 182 days each year (up from 70).
These thresholds are assessed on a rolling 12-month basis by the Valuation Office Agency (VOA). Failing to meet these criteria can result in the property being liable for council tax instead of business rates, which may include additional premiums in certain regions.
Tax Regime Overhaul
Starting April 2025, the Furnished Holiday Let (FHL) tax regime was abolished. This change means:
- Mortgage interest relief is now limited to the basic rate of 20%.
- Capital allowances can no longer be claimed.
- Capital Gains Tax reliefs, such as Business Asset Disposal Relief and Rollover Relief, are no longer available.
- Holiday let income is now treated the same as income from standard residential property lettings.
These alterations may lead to higher tax liabilities for property owners.
Council Tax Premiums
Local councils in Wales have the authority to impose council tax premiums on second homes and furnished holiday lets that don’t meet the business-use criteria. These premiums aim to reduce the number of properties left empty and help ease housing pressures in popular areas.
Proposed Reforms
In response to concerns from property owners, the Welsh Government has launched a consultation proposing:
- Allowing holiday let owners to average the 182 letting days over several years.
- Counting up to 14 days of free holidays donated to charity towards the 182-day target.
- Introducing a 12-month grace period before properties that fail to meet the criteria are reclassified from business rates to council tax.
These proposals aim to provide more flexibility and support to holiday let owners.
What This Means for You
If you’re considering purchasing a holiday let property in Wales, it’s crucial to:
- Ensure the property meets the new availability and letting criteria to qualify for business rates.
- Be aware of the changes in the tax regime that may affect your profitability.
- Stay informed about local council policies regarding council tax premiums.
- Monitor the outcome of the Welsh Government’s consultation and any subsequent policy changes.
Navigating these regulations can be complex, so consulting with a local property expert or legal advisor is highly recommended.
Holiday Let Mortgage Calculator
A holiday let mortgage calculator is a useful tool for estimating:
- How much you could potentially borrow.
- Your monthly mortgage repayments.
- The rental income required to cover your mortgage costs.
In today’s ever-changing economic climate, using a holiday let mortgage calculator is essential for assessing affordability and understanding potential returns on your North Wales investment. By entering details such as the property price, deposit, and projected rental income, you can get a clearer picture of whether a holiday let property is financially viable.
Examples of Holiday Let Mortgage Calculators:
Holiday Let Mortgage Calculator by Holiday Let Mortgages
Holiday Let Mortgage Calculator by Commercial Trust
Holiday Let Mortgage Calculator by Monmouthshire Building Society
Difference between Holiday Let Mortgages and Buy-to-Let Mortgages
A holiday let mortgage is designed for properties that are rented out to short-term guests, such as holidaymakers staying for days or weeks at a time. These mortgages take into account the seasonal and often fluctuating nature of rental income, which makes them higher risk for lenders. As a result, holiday let mortgages usually require a larger deposit—often 25–40%—and lenders typically assess whether projected rental income will cover mortgage repayments with a buffer, often 125–145%. They may also allow limited personal use of the property, usually up to 60 days per year, and the property must meet certain standards and be located in a recognised holiday destination.
In contrast, a buy-to-let mortgage is intended for properties let to long-term tenants, typically under six- or twelve-month tenancy agreements. Buy-to-let mortgages usually require a smaller deposit than holiday let mortgages (often 20–25%) and are based on the assumption of steady, predictable rental income. Because the rental income is more consistent, lenders generally consider these lower risk compared to holiday lets. Buy-to-let mortgages rarely allow the owner to occupy the property, and the focus is on residential rental demand rather than tourism.
In summary, the key differences lie in rental duration, income stability, deposit requirements, lender criteria, and permitted personal use. Holiday let mortgages are tailored for short-term, seasonal letting, while buy-to-let mortgages are designed for long-term, consistent tenancy arrangements.
Holiday Let Mortgage Rates and Providers
Holiday let mortgage rates are generally higher than standard residential mortgages due to the perceived risk of short-term rentals. Understanding the factors that influence these rates is essential to securing the best deal for your Wales property. Market conditions, lender policies, and your personal financial profile all play a role, making it important to shop around and compare offers.
Currently, holiday let mortgage rates typically range from 4–6%, depending on factors such as the loan-to-value (LTV) ratio, your creditworthiness, and specific lender policies. Deposit requirements usually range from 25–40%, and lenders will expect evidence of both your personal income and the property’s potential rental income to demonstrate affordability.
At Coast and Country Holidays, we can provide a mortgage letter detailing the number of days we believe the property could be let and the potential rental income it could generate. This letter serves as valuable evidence of the property’s earning potential and can strengthen your holiday let mortgage application.
Where to Find a Holiday Let Mortgage
Navigating the holiday let mortgage market requires understanding the different types of lenders:
- Specialist Lenders – Companies like Holiday Let Mortgages focus exclusively on this type of loan.
- High Street Banks – Some traditional banks offer holiday let mortgages, though criteria are often stricter.
- Mortgage Brokers – Professionals such as UKI Financial Planning Ltd can help you find the right product. A broker with experience in holiday let mortgages can save time, access exclusive deals, and manage much of the paperwork.
Steps to Take If You’re Considering a Holiday Let Mortgage in Wales
If you’re thinking about investing in a holiday let property in Wales, there are several important steps to follow before applying for a mortgage. First, research the location carefully. Look at tourist demand, occupancy rates, and seasonal fluctuations to ensure the property will generate sufficient income. Popular areas like the Gower Peninsula, Pembrokeshire, and the Brecon Beacons tend to attract more holidaymakers, but off-peak months may be quieter.
Next, check local planning and regulatory requirements. Confirm that short-term letting is permitted, that the property complies with fire and safety regulations, and that it meets the Welsh Government’s letting day requirements for business rates (252 days available and 182 days actually let per year). These rules affect both taxation and eligibility for certain mortgage products.
After that, estimate all costs and potential income realistically. Include mortgage payments, maintenance, cleaning, management fees if using an agent, insurance, and void periods. Build in a financial buffer to cover unexpected expenses or low occupancy periods.
It’s also highly recommended to consult a specialist mortgage broker. Brokers experienced in holiday let mortgages can identify suitable lenders, guide you through eligibility criteria, and help prepare financial projections that meet lender requirements. Make sure to check the lender’s criteria, including deposit requirements, maximum number of holiday lets you can own, and personal use limitations.
Finally, plan for risk and worst-case scenarios. Consider how rising interest rates, regulatory changes, or lower-than-expected occupancy could affect your investment. Having a clear plan and financial cushion ensures your holiday let remains a viable and profitable investment in the long term.
Investing in a holiday let property in Wales can be a rewarding venture, offering both lifestyle benefits and potential income. However, with changing regulations, varying mortgage rates, and location-specific considerations, it’s important to do your research and seek expert guidance before making any decisions. Understanding the mortgage process, assessing affordability, and ensuring compliance with Welsh letting rules are key to long-term success.
If you’re considering buying a holiday let or need advice on your property’s earning potential, Coast and Country Holidays can help. Our local experts can provide tailored insights and a mortgage support letter outlining projected rental income and occupancy rates — a valuable tool when applying for a holiday let mortgage.
For more information about letting your cottage with us, complete the form below to request contact from our team. You’ll also receive a copy of our FREE Owner Guide.
