UK property profit cash buyers buy-to-let mortgages

Cash buyers in the north west get biggest discounts on property

As mortgage rates remain high, cash buyers are in a better position to secure property purchases at competitive prices, with the north west offering the best bargains.

New research has revealed the true extent of the savings that can be made by purchasing property using cash as opposed to a mortgage, with cash buyers in June securing deals for an average of £27,600 less than mortgaged buyers in the UK.

Back in December 2021, prior to the series of Bank of England interest rate rises, cash buyers in the UK could purchase properties at an average of £23,600, demonstrating a relatively significant rise in the bargaining power of cash buyers now, in a higher interest rate environment.

The study by Octane Capital also flagged up the north west of England as offering the best discounts for cash buyers, with an average saving of £31,100 in the region. Apart from London, cash purchasers in every region of the UK can get a better price than they can with a mortgage.

In the north west, the average property price for those buying with cash is £195,000, compared with £226,000 for those buying with a mortgage.

Discounts across the regions

The equivalent discount in the south east is £27,600, as cash purchasers pay around £373,000 for the average property while mortgaged buyers pay £401,000.

The north east sees a slightly lower than average amount shaved off the purchase price, of £23,200. Cash buyers secure properties for an average of £169,000, compared to £146,000 for mortgaged buyers.

The picture is a bit different in London, the country’s most expensive housing market. In fact, those buying with cash tend to pay an average of £26,500 more than those buying with a mortgage. This is thought to be down to the fact that prime London follows its own pattern, being home to the country’s priciest housing.

Between December 2021 and April 2023, the south west had the highest portion of cash purchasers, accounting for 38% of all transactions during this period. Similarly, this buyer type accounts for 35% in the north east and Wales, and 34% in Scotland.

On the other hand, cash purchases made up less than a quarter (22%) of all transactions during the same period in London, due to the fact that house prices are prohibitively high for the majority of cash purchasers.

The benefits for cash buyers

For those with the assets to do so, buying with cash means a significantly lower spend overall due to not having to pay any mortgage interest costs. Aside from this, many sellers – and developers – are happy to offer a discount to cash buyers as they are often more straightforward than mortgaged buyers.

That being said, the downside of investing with cash can be that it is then tied up in the property and can only be released upon its sale, and some investors prefer to retain more liquidity and spread their assets by using a mortgage. Investors who want to diversify their portfolios often utilise borrowing for this purpose.

Mortgage conditions are tougher

As Jonathan Samuels, CEO of Octane Capital, points out, buying with a mortgage often comes with more complexities, but now has the added difficulty of affordability for many buyers.

“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.

“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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