Buying a house? Pay in cash for a £28k discount
Buying a house is the largest purchase most of us will make in a lifetime – but it may be cheaper for some than others.
Cash buyers now pay £28,000 less on average for a home than those relying on a mortgage, and the ‘cash discount’ has risen by 12.4 per cent in just two years, according to Mowered Mortgages (MM).
Based on the average house price of £308,781 in England, £222,316 in Wales, and £197,451 in Scotland, according to Land Registry data for October 2024, the figures imply cash buyers are booking a discount of nearly 10 per cent.
“Buyers who are able to show they have their finance fully in place when making an offer are much more attractive to sellers than those who don’t, and sellers will often accept a lower offer in return for the extra certainty these buyers represent, Stuart Cheetham, CEO of MPowered Mortgages, explained.
“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,” he added.
Research from online agency Yopa suggested those buying a house in cash accounted for about a third of the market early last year – the highest figure in a decade.
However, Cheetham suggested that a hotter property market along with lower interest rates has meant the number of househunters using a mortgage to fund their purchase is surging and cash buyers are “becoming relatively rarer”.
According to Rightmove, the average five-year fixed mortgage rate is now 4.61 per cent, down from 5.63 per cent a year ago, while the average two-year fixed mortgage rate is now 4.98 per cent, down from 6.16 per cent a year ago.
With markets expecting the Bank of England’s rate-cutting cycle to accelerate over the next two years, lenders have picked up the pace of rate reductions.
Cheetham said that by July, only 22.4 per cent of completed transactions were made by cash buyers.
This change may benefit both cash-buyers and those relying on a mortgage. Cash-buyers, which were already able to outcompete other bidders, may be able to get an extra discount, while those relying on debt finance may find themselves with less competition.