Short term let mortgages have moved on from holiday cottages. David Farmer explains how serviced accommodation is funded in 2026, what lenders want to see, and where deals go wrong.
Say “short term let” to most people and they picture a cottage in Cornwall with a hot tub and a wonky gate. Say it to a lender’s credit team and, until fairly recently, you’d get much the same picture.
That picture is out of date, and it’s quietly costing landlords money.
The properties I see coming across my desk now are two-bed flats in city centres, filled Monday to Thursday by consultants, contract engineers, locums and project staff. These aren’t holidaymakers. They’re commuters who happen to commute weekly rather than daily. The property is doing a job much closer to core housing for a mobile workforce than it is to a seaside bolthole.
Being based near Gatwick I get to see the growth in this sector, not holidaymakers flying out the day after, but contractors working at the airport needing somewhere to base themselves. With the new runway that need is going to increase.
Roger Morris at CHL Mortgages put it well in a recent NACFB piece, and I’ve borrowed the phrase because it’s the right one: this isn’t accidental letting, it’s a deliberate strategy built around how people actually use cities today.
Hybrid working settled down. That’s the short version.
Around 46% of office-based professionals now travel to their workplace three or more days a week, up from 43% in 2024, with occupancy across larger organisations sitting steady at roughly 50–60% (CBRE/ONS data, 2026). The pattern has stopped moving. Mid-week is the anchor.
That creates a very specific type of demand. Someone needs to be in Manchester or Birmingham or Leeds from Monday afternoon to Thursday morning, forty weeks a year. A hotel is expensive and impersonal. A twelve-month tenancy makes no sense. What they want sits in between: a proper flat, furnished properly, with a kitchen and a washing machine and a door they can shut.
For the landlord, that turns the old model on its head. Peak demand is midweek, not weekends. Demand is driven by business calendars rather than school holidays, so it’s steadier through the year. And the operator side is far more professional than it was – purpose-bought furniture, actively managed pricing, cleaning schedules, guest standards.
“The market grew up faster than the funding did. I’ve sat in meetings where a landlord with four professionally run city apartments and three years of clean accounts was being assessed as though he’d bought a beach hut on a whim. The property was doing serious work. The short term let mortgage application didn’t reflect that, and it should have.” – David Farmer, Lime Finance Solutions
The good news is that the disconnect is closing.
Specialist lenders have moved from tolerating serviced accommodation to actively competing for it. CHL Mortgages, for example, recently cut rates by 0.3% across its short term let range, with pricing from 3.16% for holiday lets and serviced apartments. Others have followed.
That said, the market is still narrow. Fewer than 15 UK lenders have genuine short term let criteria, and only a handful will take serviced accommodation or Airbnb-style letting without conditions attached. So the pool is real but shallow, and knowing which lender does what matters more here than in almost any other corner of property finance.
Broad terms as they stand:
Deposits for short term let mortgages generally start at 25–30%, though 35% is common where the profile is heavily serviced accommodation rather than traditional holiday letting. Loan to value runs up to around 80% with the more specialist lenders. Pricing typically carries a premium of roughly 0.5% to 1.5% above the equivalent standard buy to let rate – that’s the lender charging for income variability, not punishing you.
Five-year fixes are more popular here than elsewhere, for good reason. Income can be lumpy month to month, and certainty on the cost side helps you sleep. Worth reading alongside our piece on how swap rates drive commercial borrowing costs, because the fixed rate you’re offered starts life in the swap market long before it reaches you.
Tax changed, and some people missed it. The Furnished Holiday Lettings regime was abolished on 6 April 2025 (HMRC guidance). Short term lets no longer get the old advantages on mortgage interest relief, capital allowances or pension-relevant earnings. If your model was built on FHL treatment, the numbers you’re working from are two years stale. Speak to your accountant, not to me – but do speak to someone.
Registration is coming. England’s mandatory short term let registration scheme, brought in under the Levelling Up and Regeneration Act 2023, is confirmed in principle but still hasn’t launched. The timetable has slipped from 2024, then from spring 2026, and the current position is “later in 2026” with no firm date (DLUHC/MHCLG consultation). Lenders are watching it. Some are already asking how you’d comply. Being able to answer that question well is worth real money at the credit stage.
Ownership structure. Most of this is now written through a limited company, and for the same reasons it dominates conventional buy to let – see our piece on why limited company buy to let has become the industry standard. If you’re holding short term lets personally, it’s worth a conversation.
Leasehold and planning. Plenty of city centre flats have leases that prohibit short term letting outright, and some councils now require planning consent for change of use. A lender’s solicitor will find this. Better you find it first. Our note on leasehold reform and its effect on buy to let is a useful companion here.
Here’s the practical bit, and it’s the part I find myself explaining most often.
Short term let mortgages applications lives or dies on evidence. Not projections – evidence. Twelve months of booking data beats a spreadsheet forecast every time. Occupancy rates, average nightly rate, seasonality, direct bookings versus platform bookings, your cleaning and management costs laid out honestly.
Lenders in this space are essentially underwriting a small business that happens to own a flat. Present it that way and the conversation changes completely. Present it as a buy to let with unusual tenants and you’ll get buy to let answers.
It’s a bit like reading a cricket pitch. The captain who wins the toss well isn’t guessing – he’s looked at the surface, the forecast, and what happened here last season. A good credit paper does the same job for the underwriter: it removes the guessing.
I’ll be honest, I’ve seen strong deals fall over purely on presentation. Good property, good operator, good income – badly explained. That’s a frustrating way to lose a deal, and an avoidable one. It’s a large part of what a broker is actually for.
The sector has grown up. The stereotype hasn’t quite caught up, and neither has every lender – but enough of them have that a well-run city apartment with proper records should now find sensible, competitive funding.
The gap between the best and worst terms available on the same property is wider in short term lets than almost anywhere else I work. That gap is worth closing.
If you’re running serviced accommodation and your funding was arranged when it was still being treated as a holiday cottage, it’s probably worth another look. You can run some rough numbers with our repayment calculator first, or just pick up the phone. I’m always happy to have that conversation.
David Farmer Lime Finance Solutions
No. Standard buy to let terms almost always require an assured shorthold tenancy. Letting short term without telling your lender is a breach of the mortgage conditions and can lead to the loan being called in. Get the right product from the start, being a specialist short term let mortgage.
Short term let mortgages usually require 25–30% minimum, and often 35% where the property is run as serviced accommodation. It varies by lender and by how much experience you can demonstrate. This is a moving beast so well worth a conversation about where the market sits at any given time.
It helps a great deal, but no. A few lenders will consider first-time landlords on short term let mortgages, though expect a lower loan to value and closer scrutiny of your management arrangements.
Not directly, but lenders increasingly want to know you have a plan for compliance. Being registered and demonstrably compliant once the scheme goes live will widen your options rather than narrow them.
Yes, and most people now do. Lender criteria for SPV ownership in this space are well established.
Typically 0.5% to 1.5% above the equivalent buy to let rate but that is changing and the gap beginning to narrow. Whether that’s worth it depends entirely on the gross yield your property achieves – and in the right city centre location, it usually is by some margin in your favour.
Lime Finance Solutions is a trading name of Lime Coaching & Consultancy Ltd, authorised and regulated by the Financial Conduct Authority, FRN 726314. We are an authorised credit broker and not a lender. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Over 30 years finance experience. Former credit underwriter, founder of Lime Finance Solutions in 2012. Multi Award winning business, featured in Sunday Telegraph, Parliamentary Review, Sky TV and others. Regular contributor to press and business associations. FCA Authorised, ALIBF Qualified. Specialist in Commercial Mortgages, Business Lending, Property and Development Finance.
Tel: 01293 541333
Email: hello@lime-fs.com
Tel: 0207 866 2102
Email: hello@lime-fs.com
Tel: 01293 541333
Email: hello@lime-fs.com
Tel: 0207 866 2102
Email: hello@lime-fs.com
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