But mortgage-funded buyer numbers continue to rise
Cash buyers are paying an average of 13% less than mortgage-funded buyers in the UK property market, according to new research from MPowered Mortgages.
The lender’s analysis of Land Registry data for September 2024 revealed that cash buyers secured discounts of £28,189 per property on average, equating to 9.3% lower prices compared to those purchasing with a mortgage.
This marks a 12.4% increase in the average “cash discount” over the past two years, reflecting shifting dynamics in the property market since the turbulence following Liz Truss’s mini budget in September 2022.
The discounts for cash buyers are particularly pronounced in certain regions. In North West England, cash purchasers paid 13.4% (£31,827) less than mortgage-reliant buyers, the largest disparity nationwide. In Scotland, the average discount was 12.8% (£26,476), while in North East England, it stood at 12.4% (£22,122).
London was the only exception, where cash buyers paid an average of £15,344 more than those with mortgages. The capital’s 3% “cash premium” is attributed to strong demand from international investors who typically pay cash. However, this premium has nearly halved since September 2022.
The growing disparity between cash and mortgage buyers comes as mortgage activity surges. The Bank of England reported 68,300 mortgage approvals for house purchases in October 2024, a 41.5% year-on-year increase and the highest monthly total since August 2022.
Meanwhile, residential property transactions rose sharply. HMRC data showed a 10% month-on-month increase in October 2024, with transactions up 21% compared to October 2023.
MPowered Mortgages noted that cash buyers now account for only 22.4% of home purchases, based on the most recent figures from July 2024. This marks a drop from 28.6% in September 2022, underscoring the growing dominance of mortgage-funded buyers in the market.
“Two factors explain the power cash buyers have to pay less for the home they want – scarcity and speed,” said Stuart Cheetham (pictured), chief executive of MPowered Mortgages. “As the property market heats up and interest rates fall, the number of househunters using a mortgage to fund their purchase is surging and cash buyers are becoming relatively rarer.
“Then there’s the trump card that cash buyers can play – speed. Rising demand is making a slow process take even longer, and the average seller in England and Wales now has to wait 152 days between accepting an offer and completing their sale.
“That’s why buyers who have their finance fully in place when making an offer are vastly more proceedable than those who don’t. Sellers will often accept a lower offer in return for the extra certainty these buyers represent.”
Cheetham also highlighted how technological advancements, such as AI, are helping mortgage buyers compete.
“Many customers report that this speed and certainty give them a decisive advantage during the buying process, providing leverage that was until now enjoyed only by cash buyers,” he added.
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