{"id":6093181,"date":"2023-03-20T08:50:17","date_gmt":"2023-03-20T08:50:17","guid":{"rendered":"https:\/\/www.buyassociationgroup.com\/en-gb\/?p=6093181"},"modified":"2023-03-19T19:59:31","modified_gmt":"2023-03-19T19:59:31","slug":"cash-interest-rates","status":"publish","type":"post","link":"https:\/\/www.buyassociationgroup.com\/en-gb\/2023\/03\/20\/cash-interest-rates\/","title":{"rendered":"More landlords buying with cash to escape higher interest rates"},"content":{"rendered":"

Although interest rates have come down since their peak at the end of 2022, a growing number of landlord buyers are opting for cash purchases to save money.<\/strong><\/p>\n

Property investors<\/a> often use mortgage financing when buying new properties in order to help them spread their risks and their assets, often allowing them to make greater returns overall by being able to own more properties. It can be a good strategy for many buy-to-let landlords<\/a>.<\/p>\n

On the other hand, the advantage of making a straight cash purchase can be seen more clearly when interest rates are on the rise. The average buy-to-let mortgage rate is currently around 5.81% for a two-year fixed rate, and depending on your loan size, this can affect a landlord’s overall yields<\/a>.<\/p>\n

New research from Hamptons<\/a> has revealed that, with interest rates expected to remain at a similar level rather than significantly falling back to the low-rate environment of pre-2022, landlords are responding by switching to cash over borrowing to fund their new properties.<\/p>\n

Cash-rich investors<\/h4>\n

Those who have been active in the property sector<\/a> for a number of years may well have built up a fair amount of cash in their portfolios. House prices have soared in recent years, and many investors may well cash in on some of their investments now to reinvest elsewhere.<\/p>\n

According to Hamptons, 59% of buy-to-let purchases so far in 2023 were funded by cash. So far, this is up on last year’s full-year total of 53% mortgage-free buyers.<\/p>\n

In the lowest-yielding parts of the country in terms of rents, the increase in cash investors in response to rising interest rates has been the highest. For example, in London<\/a> where yields tend to be the weakest in the UK, cash buyers jumped to 67%, up from 43% in 2022.<\/p>\n

In the north of England<\/a> as a whole, which boasts some of the highest yielding areas in the country, the number of mortgage-free buy-to-let purchases has actually fallen annually. However, it is still relatively high, at 60% rather than 63% in 2022, due to the fact that property is cheaper there so cash purchases are more feasible.<\/p>\n

Stress tests are one issue that is also being cited as a push towards cash investment, alongside interest rates, as mortgage lenders have become more strict. When interest rates are higher and yields are lower, some borrowers may struggle to obtain the mortgages they require.<\/p>\n

Hamptons commented: \u201cGiven that these properties are often located in the most expensive parts of the country, previously, when rates were lower, investors would use a mortgage to bridge the gap between their savings and the purchase price.<\/p>\n

“But at today\u2019s rates, it\u2019s harder for investors to pass a lenders\u2019 stress test meaning more are having to rely on cash to fund their purchase.\u201d<\/p>\n

Will interest rates rise again?<\/h4>\n

This week on 23rd March, the Monetary Policy Committee will meet again to decide where to go next with the Bank of England base rate, which currently sits at 4% following 10 consecutive hikes since last year.<\/p>\n

Opinions are mixed on what the most likely outcome will be for interest rates this week, but investors are betting more heavily on the rate being held as it is, according to research by AJ Bell. It predicts the base rate will go up by another quarter point to 4.25 in the future, before being cut back to 4% by the end of the year.<\/p>\n

While interest rates have been on the rise as part of an attempt to curb inflation, which is now at 10.1% and expected to fall significantly to 2.9% by the end of the year according to Jeremy Hunt’s Budget<\/a>, mortgage rates haven’t always followed suit.<\/p>\n

In fact, after a rapid rise after the government’s mini-budget in the autumn last year, mortgage rates in both mainstream and buy-to-let markets have been steadily declining, which is certainly positive news for anyone in the housing industry and homeowners.<\/p>\n","protected":false},"excerpt":{"rendered":"

Although interest rates have come down since their peak at the end of 2022, a growing number of landlord buyers are opting for cash purchases to save money. Property investors often use mortgage financing when buying new properties in order to help them spread their risks and their assets, often allowing them to make greater… Read more »<\/a><\/p>\n","protected":false},"author":1069,"featured_media":5463,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[2,26],"tags":[412,291,107],"acf":[],"_links":{"self":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts\/6093181"}],"collection":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/users\/1069"}],"replies":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/comments?post=6093181"}],"version-history":[{"count":5,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts\/6093181\/revisions"}],"predecessor-version":[{"id":6093186,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts\/6093181\/revisions\/6093186"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/media\/5463"}],"wp:attachment":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/media?parent=6093181"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/categories?post=6093181"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/tags?post=6093181"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}