Cash buyers are making home purchases for less than their mortgaging counterparts, suggesting they are in a stronger position thanks to the current environment of rising interest rates, Octane Capital has found.
In June 2023, cash buyers sealed deals for £27,600 less than those using a mortgage, compared with a difference of around £23,600 in December 2021, before the Bank of England made the first of its 14 consecutive interest rate increases.
Some 69% of purchases were made with a mortgage across the UK between 1st December and April 2023.
Property purchasers using a mortgage bought at a higher price in every region of Great Britain, with the exception of London.
Mortgaged buyers in the North West paid the biggest premium, typically paying £31,100 more than their cash buyer counterparts, with a purchase price of £226,000 compared with £195,000.
Those using a loan paid £27,600 more in the South East, with an average offer of around £401,000 compared to £373,000.
Meanwhile there was a gap of £23,200 in the North East, where mortgaged buyers paid £169,000 and cash purchasers typically bought for £146,000.
The gap in price between cash purchases and mortgages widened over the 20 month period in every region outside of London.
In the capital, purchases with cash typically cost £26,500 more.
The existence of Prime London likely skewed the data, as a relatively small number of high-value purchases in areas like Kensington and Westminster could shift up the overall average.
Mortgaged buyers in the South West had substantial competition from cash buyers, as purchases without a mortgage accounted for 38% of transactions between December 2021 and April 2023.
Cash buyers also took significant shares in the market in the North East (35%), Wales (35%) and Scotland (34%).
In London, cash buyers only accounted for 22% of purchases, compared with 78% that used a mortgage.
The high house prices in the capital mean that all but the richest buyers are forced to use a mortgage.
Jonathan Samuels, CEO of Octane Capital, said: “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.”
He added: “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.”
