Still, majority of purchases are made with a mortgage
Cash buyers are making home purchases for less than their mortgage counterparts, especially in the current environment of rising interest rates.
Data analysis from specialist property lending experts Octane Capital revealed that in June 2023, cash buyers completed deals for £27,600 less than those using a mortgage, compared to a difference of around £23,600 in December 2021, before the Bank of England made the first of its 14 consecutive base rate increases.
The study also found that while mortgage holders were subject to rising interest rates and higher prices, the sector had remained busy, with almost seven in 10 purchases made with a mortgage across Great Britain between December 2021 and April 2023.
Property purchasers using a mortgage bought at a higher price in every region of Great Britain, with the exception of London. In the capital, purchases with cash typically cost £26,500 more, the opposite trend to the rest of the UK. This, Octane Capital noted, was likely due to the high-value purchases in Prime London.
Cash buyers only accounted for 22% of purchases in London, compared to 78% that used a mortgage. The high house prices in the city meant that all but the richest buyers were forced to use a mortgage.
“It’s always been easier to buy with cash than spend time arranging a mortgage, but in the current environment, it seems that advantage is bigger than ever, with cash buyers saving £27,600 compared to their mortgage counterparts,” commented Jonathan Samuels (pictured), chief executive at Octane Capital.
“Mortgaged buyers are subject to more processes and delays, making it hard to compete with those who can swoop in with an immediate lump sum of cash. It’s also far tougher to qualify for a loan than in late 2021, as surging interest rates make it harder from an affordability perspective, so buying with a mortgage is not an easy task.
“If you are able to qualify for a mortgage, our data suggests you should get your finance arranged as quickly as possible to ensure you can seal the deal, even if you have competition from a cash buyer. In some regions, like the South West, that competition is particularly fierce, so you have to be ready to hand over the money.”
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