Cash buyers Homes in the UK A year before March spent a third more on real estate than on average before the pandemic, showed an analysis that emphasizes the role of buyers without mortgages in stimulating the real estate boom.

In the year to March 2022, there were 482,000 cash buyers, and they spent £ 178 billion on home purchases – 17 and 32 per cent higher than the average for the three years before the pandemic, respectively – according to a study by real estate agent Savills.

Lucian Cook, head of housing research at Savills, said the share of buyers in the cash market was expected to decline last year as mortgage rates remained historically low and sparked demand from mortgage buyers. But the share of cash buyers remained unchanged at about 35 per cent of the market, and the average cash buyer bought a house worth £ 368,600 compared to the cost of £ 302,500 by the average pledged buyer.

Cash buyers include people who sell one home to buy another without a mortgage, and those who buy without pre-sale using cash.

The prospect of further growth of the Bank of England’s key interest rate is after it this week reached 1 percent – means that mortgage applicants may find that they can borrow less and will pay more for it at higher rates set by lenders.

“I suspect the market will become even more dependent on cash buyers over the next 12-24 months, given that they are less prone to rising interest rates and, as more affluent households, are often slightly less prone to the cost of living,” Cook said. .

Mortgage buyers will become more aware of the cost of debt service and less aggressive in competing in the housing market, he added. “Lenders are going to look much more closely at mortgage affordability when they evaluate mortgage applications. . . Inevitably, the market will become more balanced in relation to cash buyers.

Prices continue to rise, according to the Halifax Housing Price Index, which said they rose 10.8 percent a year in April. But Cook said price growth is likely to slow in the rest of 2022 as mortgage interest rates rise.

The analysis, based on data from the Office for National Statistics and the Land Registry, also found areas where the share of cash buyers was highest.

In rural or coastal places where second homes can be obtained, such as North Norfolk, West Devon and the Isle of Wight, more than half of buyers do not use a mortgage, while most areas of London have the lowest housing prices in the country. cash buyers – about 15 percent. However, in Kensington and Chelsea, an area popular with wealthy foreign buyers, 48 ​​percent were cash buyers.

Cook found a “reasonable correlation” between the proportion of the population over the age of 60 and the proportion of buyers available locally. In local governments, where more than half of buyers were without a mortgage, more than a third of the population was over 60 years old. In areas where cash buyers accounted for less than 15 percent of transactions, it was 16 percent.

According to ONS, in the last decade in England the proportion of families over 65 has increased compared to all other age groups.

One of the reasons that the power of cash buyers needs to become stronger is that the prospects for first-time buyers are deteriorating. They face higher house prices, more expensive or limited mortgages and shrinking cost of living. In March 2023, the state capital loan scheme “Help to Buy” for first-time buyers should also end.

“The goal of home ownership will be even more challenging,” Cook said.