Sustained investor demand and strong yields underpin a resilient holiday let market, Cumberland BS's first sector index shows
Nearly nine in 10 mortgage brokers (88%) reported an increase in holiday let enquiries over the prior 12 months, according to Cumberland Building Society's inaugural Holiday Let Index.
The findings, based on results of a survey conducted by research firm Pegasus Insight, point to sustained market activity despite a period of significant tax and regulatory change.
Twenty7tec data, cited alongside the survey results, recorded 3,471 holiday let mortgage searches on its platform in March 2026, with 3,553 holiday let products available by May 2026 — figures the report describes as consistent with active lender and investor participation.
Higher yields relative to standard buy-to-let remain the primary driver of new investment, cited by 32% of investors surveyed. Regulatory pressure on the buy-to-let market, portfolio diversification and growth in short-term rental demand each accounted for 12% of responses.
Eighty-six percent of respondents reported gross yields above 5%, with 44% achieving yields of 5–6% and a further 34% in the 7–8% range. Sixty-one percent said they feel positive about future yield prospects, and 57% expect capital growth to increase.
Long-term confidence was measured on a scale of one to ten, with 44% of investors scoring their confidence at eight or above. The report notes this should be read against a backdrop of new tax rules, the prospect of further regulation and evolving local authority policies.
Following the removal of Furnished Holiday Let tax advantages, 48% of investors said their profitability had increased. Thirty percent reported a decline of up to 15%, while 27% said profitability was broadly unchanged.
Adaptation strategies varied. Forty-seven percent of owners raised nightly rates; 46% focused on increasing occupancy; 34% reduced maintenance or capital expenditure; 26% changed their property management approach; and 19% switched to interest-only mortgages.
The report notes a potential longer-term risk: some owners may be deferring property investment rather than eliminating unnecessary spending, which could affect asset standards over time.
Thirty-six percent of brokers said they were seeing more experienced and professional investors entering the market. Among respondents, limited company ownership is now commonplace: 48% of brokers said between 26% and 50% of their holiday let clients use a limited company structure, and 44% said between 51% and 75% of their clients do so.
Investors are also prioritising steady income over short-term capital gains, with 16% citing long-term income as a key driver of current strategy and 12% reporting lower appetite for leveraged borrowing than previously.
Brokers identified income assessments based on short-term rental performance and easier switching between holiday let and assured shorthold tenancy classifications as their top priorities from lenders, each cited by 16% of respondents. More realistic affordability assessments and faster underwriting were each mentioned by 12%.
According to the report, 30% of investors said they intend to purchase another holiday let within the next 12 months, and 25% plan to expand their existing portfolio. Sixty-one percent intend to maintain their current portfolio size, while 3% said they plan to exit the market.
"Given everything the holiday let sector has experienced over the past few years, it would have been easy to surmise that investor confidence had fallen sharply," said Grant Seaton (pictured right), head of intermediary lending at Cumberland Building Society. "What our research actually revealed was a much more nuanced picture, with several findings that challenged some of the assumptions surrounding the market.
"We hope our inaugural Holiday Let Index becomes a valuable point of reference for brokers, investors and anyone with an interest in the holiday let market. More importantly, we hope it encourages further discussion about where the holiday let market goes next."
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