Cash buyers in the UK property market are gaining a bigger advantage over those using mortgages, as rising interest rates and higher prices make it harder for mortgage holders to compete. Data from Octane Capital showed that in June 2023, cash buyers were completing deals for £27,600 less than mortgage buyers, compared to a gap of around £23,600 in December 2021.

The study also found that nearly seven in 10 property purchases in Great Britain between December 2021 and April 2023 were made using a mortgage, despite the challenges posed by rising interest rates and higher prices. However, mortgage buyers were paying higher prices compared to cash buyers in every region of Great Britain, except for London. In London, cash buyers were typically paying £26,500 more than mortgage buyers, likely due to the high-value purchases in Prime London.

Summary

1. Cash is King: Those purchasing properties with ready cash are finding themselves in a strong position. In simple terms, they are able to save a significant chunk of change. In June 2023, these cash buyers got homes for a whopping £27,600 less than folks using a mortgage. To give a perspective, back in December 2021, this difference was only around £23,600.
2. Why is Cash so Powerful Now?: The Bank of England made a decision that changed the game. They increased the base rate (think of it as the “standard” interest rate) 14 times in a row! This means mortgages, which rely on borrowing money, became pricier because of the higher interest. So, many buyers using mortgages had to pay more, making cash purchases even more attractive.
3. But Mortgages are Still Popular: Despite these rising costs, many people are still buying homes with mortgages. In fact, between December 2021 and April 2023, almost 7 out of 10 homes were bought this way across Great Britain.
4. A Twist in London: London always has a flair for being unique. While the rest of the UK sees cash buyers getting better deals, in London, it’s the other way around. Properties purchased with cash cost about £26,500 more! But why? Well, London is home to some of the country’s most luxurious properties. These “prime” spots are so attractive that cash buyers are willing to pay a premium.
5. The Mortgage Majority in London: Despite this trend, 78% of London buyers still opt for mortgages. London properties have high price tags. Imagine trying to buy an apple priced like a gold bar; not many can afford it in one go, hence the reliance on mortgages.
6. Words from the Top: Jonathan Samuels, the big boss at Octane Capital, shared his thoughts. He highlighted how cash buyers now have a bigger edge because of the challenges of arranging a mortgage. It’s like trying to buy an apple when the seller has ten other customers – you need to be quick! He advises that if you’re planning on a mortgage, get your funds sorted ASAP, especially in places where competition is hot, like the South West.

Takeaway: If you’re lucky enough to buy a property with cash, now might be a golden time. But if you’re looking at a mortgage, just remember to be swift and prepared, so you can make that purchase before someone else does!