Want a £19,000 discount on your home? Don’t get a mortgage
In the frenzy of the housing market boom, cash is undeniably king – but it turns out he is a complete cheapskate.
Londoners selling up in the capital and buying mortgage-free in cheaper locations have achieved record discounts of nearly £19,000, versus purchasers who have had to borrow this year.
A cash buyer purchasing outside the capital in September spent 8pc less than a mortgaged home mover, according to analysis of Land Registry data by Jackson-Stops estate agents.
This was the biggest September gap since records began in 2012. Back then, the average cash buyer discount was 5pc.
The total cash saving in England in September jumped 20.5pc year-on-year to hit £18,796.
The pandemic has caused a surge in cash buyers as Londoners have sold up in the capital and moved elsewhere, cashing in on decades of price growth and buying in cheaper, more rural areas.
Meanwhile, the “staycation” boom brought a spike in wealthy homeowners purchasing second homes outright. The number of buyers purchasing mortgage-free has jumped 12pc since 2019.
The extreme lack of supply means that buyers who can purchase mortgage free and chain free have had a bigger edge over those trying to move up the ladder than ever before.
Cash buyers can move much faster. In the scramble to buy, and particularly in the rush to meet the recent stamp duty holiday deadline, speed has meant big savings.
Nick Leeming, of Jackson-Stops, said: “In a competitive market, speed is paramount and how quickly a buyer can proceed is often what will clinch a sale with vendors.”
Cash buyers made the largest percentage savings in the North East, where the average discount was 13pc. But the biggest cash savings were in the North West, where the average discount of 12.9pc was equivalent to £27,583.
The percentage savings were smaller in the South, but high house prices meant the savings were still hefty in cash terms. In the South East and East of England, cash buyers earned respective discounts of 6.6pc and 7.6pc compared to mortgaged purchasers. This meant they saved £24,852 and £25,571 in cash.
In some markets, particularly those on the coast, however, competition has been so fierce even buying mortgage-free does not count for much. Nationally, there was a ratio of 19 registered buyers for every newly listed property, according to Jackson-Stops. In the South West, that jumped to 23. In Dorset specifically, the number was 26.
Across the region, cash buyers could negotiate only a 2.3pc discount compared to mortgaged buyers – a saving of £7,000 versus the wider market. This was despite the fact that they were spending on average £40,800 more than they did pre-pandemic.
Jonathan Cunliffe, a Cornwall estate agent, said: “During the pandemic we saw the return of the second home buyer and the return of the cash buyer, coming primarily from London and the South East.”
Philip German-Ribon, of Jackson-Stops’ Bridport and Dorchester branch, said a recent listing in Dorset at the £1m mark received 10 offers within days of launching. Half were from cash buyers. But buyers with mortgages in the South West are competing with cash buyers by moving into rental properties to make themselves chain-free, he said.
