Airbnb Mortgage Considerations for Homeowners
Written on 9 March 2025 by
The rise of Airbnb and other short-term rental platforms has provided homeowners with new opportunities to generate income. However, recent regulatory and financial changes in the UK have made it essential for homeowners and lenders to reassess their approach to short-term letting.
Initial Considerations for Residential Homeowners
- You’re only renting out a room on a short-term basis and therefore don’t need to declare this to your lender.
- You’re living in the property for the majority of the year and only rent it out for up to 90 days per year.
- You get consent to let from the lender and let out the whole property for more than 90 days.
After taking the above into consideration and now intending to let the property through Airbnb, homeowners should ensure the following to avoid any issues:
Think About the Lender in Advance
If you’re about to purchase a property and take out a mortgage with the intention of letting it out as a form of income, make sure you think about this well in advance. The type of mortgage products available will be dependent on the lender. For example, Metro Bank and Barclays are two leading lenders that allow borrowers to share their space on platforms like Airbnb for up to 90 nights a year.
Check for Restrictions
If you already have a mortgage, it’s essential to check in with your current mortgage provider that there are no restrictions, as well as understand the terms in which you can let out.
Review Your Insurance
Not only do you need to consider the requirements of your mortgage provider, but it’s also equally important to review your insurance to ensure your policy remains valid. Building and contents premiums may increase with the knowledge of non-family members occupying the property and the increased risk of damage and theft.
Price Point is Key
If you’re considering letting out a room or even an entire property, make sure you do your research when it comes to price points, considering both typical budgets and locations for those you’re looking to let to.
Don’t Forget Tax
Under the Government’s Rent a Room Scheme, you can earn £7,500 tax-free each year from letting out a spare room or your whole property. If your rental income is below the threshold, no further action is required as the tax exemption is automatic, but if you go over the allowance, don’t forget to complete your tax return form.
Regulatory Changes
1. Mandatory Registration for Short-Term Rentals
As of 2025, all short-term rental properties must be registered with local councils. This measure aims to increase transparency, prevent housing shortages, and ensure properties meet safety standards. Homeowners must now comply with local requirements, including safety inspections and planning permissions in specific areas.
2. New Planning Restrictions in High-Demand Areas
Local authorities in areas facing housing shortages have been granted greater control over short-term rental properties. Some councils now require homeowners to obtain specific planning permissions if they wish to use their property for short-term lets. This change aims to prioritise long-term housing availability while still allowing tourism to flourish in controlled conditions.
3. Taxation Adjustments Affecting Short-Term Rentals
In a significant shift, the government has abolished the Furnished Holiday Lettings (FHL) tax regime from April 2025. Previously, this scheme offered tax advantages to landlords of qualifying holiday lets, such as capital gains tax relief and the ability to offset mortgage interest against rental income. With the removal of these benefits, short-term rental income is now taxed under standard property income rules, reducing potential profitability.
Considerations for Homeowners
With these changes, homeowners must carefully evaluate the feasibility of continuing short-term lets.
- Financial Viability: The removal of FHL tax incentives may lower net rental yields. Homeowners should conduct a profitability assessment, factoring in the new tax implications.
- Regulatory Compliance: Meeting council requirements, including mandatory registration and safety inspections, is now a necessity.
- Market Adaptation: A reduction in short-term rental supply due to stricter regulations may drive higher rental prices for compliant properties, presenting an opportunity for those who meet the new requirements.
The Role of Mortgage Lenders
Lenders must also adapt their strategies to accommodate borrowers who rely on short-term rental income. This includes:
- Flexible mortgage products - developing loan products that consider fluctuating income from short-term lets, offering more adaptable repayment options
- Enhanced risk assessments - factoring in the impact of regulatory changes on the viability of short-term rentals when assessing mortgage affordability
- Borrower education - helping clients understand new regulations and guiding them in making informed property investment decisions
With the evolving regulatory landscape, short-term letting remains a viable but increasingly complex investment option. Homeowners must navigate stricter requirements, adjust to new tax obligations, and work with lenders who understand these industry shifts.
If you’d like to speak to one of our specialist brokers, regarding a holiday let mortgage, get in touch today on 0808 303 5528.
Category:Nicholas Mendes
