High mortgage rates mean sellers are more likely to accept a cash offer on their property. Good news for cash buyers but mortgage holders are struggling to climb the property ladder.
New research shows that homeowners are increasingly likely to accept an offer from a cash buyer, meaning it’s tougher than ever for those relying on a mortgage.
Property experts Yopa found that last year (2023), 34.5% of house purchases were made by cash buyers – that’s the highest it’s been in a decade!
And it looks like 2024 is going the same way, with nearly a third (32.8%) of all house sales in the first two months of this year involving no mortgage at all.
So why are cash buyers so dominant?
Well, it’s all down to the fact that mortgage rates have been shooting up, making it much pricier for people to borrow money to buy a home.
This means that cash buyers are now a much more attractive prospect for anyone looking to sell their property.
Verona Frankish, boss of Yopa, explains: “Mortgages have become much more expensive since interest rates started to climb and we’re now seeing more cash buyers in the market as a result.
“It’s simply tougher for those who need a mortgage, meaning cash buyers are often the preferred choice for people selling their homes.”
However, there is some good news for mortgage holders. Frankish believes that interest rates are likely to fall later this year, which should help to make mortgages more affordable.
She said: “The good news is that there is light at the end of the tunnel and we expect interest rates will start to ease this year.
“This should mean the market returns to a better balance between cash buyers and mortgage buyers.”
Cash buyers were also popular in 2013 and 2014
Yopa’s research found that the last time cash buyers made up such a large proportion of the housing market was back in 2013 and 2014.
Back then, around 33% of purchases were made by cash.
However, between 2019 and 2022, the number of cash purchases fell significantly, with less than 29% of house sales going to cash buyers.