While the holiday let mortgage market improves for landlords, upcoming tax changes may pose challenges.

The number of buy-to-let mortgages that borrowers can use to finance a holiday let purchase increased to 445 at the start of August, according to analysis by Moneyfactscompare.co.uk.

By contrast, there were just 362 products to choose from one year ago and 415 available at the start of the year.

As the number of deals on offer increased, the number of lenders providing these specialist mortgages also rose slightly to 34, compared to 32 in August 2023. The majority of these lenders are building societies.

In further positive news, average rates on mortgages that can finance holiday lets dropped over the past year, falling from 7.16% at the start of August 2023 to 6.20% at the start of August 2024.

But, even with these encouraging developments in the buy-to-let mortgage market, landlords of holiday lets need to prepare for a range of changes in 2025.

Fewer tax advantages

The former Chancellor of the Exchequer, Jeremy Hunt, announced in the Spring Budget that the Furnished Holiday Lettings (FHL) tax system would be overhauled and brought in line with the tax system for longer-term lets from April 2025.