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Cash Buyers Secure Largest Discounts in UK Property Market

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    Sellers Offering Bigger Discounts to Avoid Market Uncertainty

    New data has revealed that more sellers are likely to provide larger discounts for cash buyers over mortgaged ones to avoid any potential pitfalls of market uncertainty.

    Let’s see how this affects property investment going forward!

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      Home buyer are signing contract on sheet with agent or broker in office. Property investment in UK market

      Cash Buyers Score Higher Discounts as Mortgage Rates Rise

      Mortgage rates have risen over the last few years, leading to increased uncertainty regarding affordability within the mortgage market.

      Analysing house price data for both cash and mortgage-backed homebuyers, recent data from Octane Capital states that cash buyers in the UK have received more significant discounts on properties comparatively since interest rates began to soar in December 2021.

      According to this research, as interest rates started to rise from a historically low level of 0.1%, the average cash buyer in the UK was paying around £255,616 for properties across Britain. This represented a discount of -8.5% compared to the average mortgage-backed house price of £279,220.

      In August 2023, the Bank of England revealed that the base rate finally steadied at 5.25%. However, with interest rates remaining high, uncertainty prevailed in the mortgage market as buyers grappled with a constantly shifting lending landscape.

      Sellers accepted offers from cash buyers at 9.4% lower than for mortgaged buyers, meaning borrowers paid an average of £301,932 for a property, compared with £273,685 for a cash buyer.

      Today, Octane Capital’s data shows that this has increased even further, with a 9.7% discount for cash buyers compared to mortgaged ones, which equates to £268,346 versus £297,185 for mortgaged buyers.

      Octane Capital believes that along with the savings from not having to pay mortgage fees and the interest saved, buying with cash could be even more lucrative for those who can afford it.

      Find Out More: Want to get started with buy-to-let investment? Discover the best buy-to-let areas with our 2024 investment guides!

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      Look North for the Best Cash Buyer Discounts

      For buyers or investors with surplus cash, Octane Capital suggests that the most favourable discounts can be found in the north of England, where property prices also tend to be the lowest on average.

      For instance, in the North East, a cash purchase of a property can yield an average discount of 14.6%.

      In the North West, the average cash buyer can secure a reduction of 14.1% compared to a buyer relying on a mortgage.

      The West Midlands also presents a robust option for those investing with cash, offering average discounts of 8%.

      London, however, stands as an exception to this trend. In December 2021, cash buyers paid 5.1% more than the average mortgage-backed buyer. This figure has reduced to 3.2% in 2024 but remains an outlier compared to the rest of the UK market.

      This is likely attributed to the capital’s allure for a larger proportion of cash buyers, which naturally comes with heftier price tags than the average property.

      Further Reading: Learn more about North West property investment with our recent insights into buy-to-let in Liverpool and the Manchester property market!

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        Sellers' Willing to Stretch' for Cash Buyers

        Being a cash buyer brings many advantages, with the primary one being the ability to complete transactions much more quickly – all while securing a more favourable price.

        This is also particularly appealing to sellers, as there is no ambiguity surrounding the amount a buyer has available to invest.

        CEO of Octane Capital, Jonathan Samuels, echoed this sentiment: “Sellers will always offer discounts to cash buyers as they provide a swifter, more certain sale without the potential pitfalls that can come from those purchasing with the help of a mortgage. However, in recent years, the extent to which sellers are willing to stretch for a cash buyer has only increased, and this has been largely due to the uncertain mortgage market conditions spurred by higher interest rates.

        “As a result, sellers have been more inclined to slash their price expectations even further for a cash buyer, as the benefit of their far stronger market position far outweighs the discounted price required to secure them.”

        Besides the advantage of owning a property outright and avoiding interest payments on any borrowing, investors may also gain access to a broader selection of properties.

        Renovation projects or off-plan developments, for example, are occasionally listed as’ cash buyer only’, offering potential opportunities beyond traditional purchases.

        For more property investment insights, check out some of our handy area guides:

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        Reece Pape

        Reece Pape is a property writer at RWinvest. Reece is passionate about keeping property investors updated on must-have information and housing market news, utilising the latest property market statistics and data.