Cash for homes sales hit record high
A record 40% of homes that changed hands across the UK in January were bought by cash buyers.
The proportion of properties that are sold to people who do not need a mortgage has more than doubled during the past five years, according to the Council of Mortgage Lenders (CML).
Just 18.7% of sales were made to people who did not need to borrow money to fund their purchase in June 2005, the first month for which figures are available. But by January this year the level had soared to 40%.
The CML attributed the increase in the proportion of cash buyers to the current problems in the mortgage market, which have led to a steep fall in net lending from £108bn in 2007, before the credit crunch struck, to just £8.4bn last year. It said as the number of people buying a property with a mortgage declined due to the lower lending levels, the proportion of sales that went to cash buyers had increased.
It added that the number of cash buyers had remained broadly unchanged, at 22,267 in April 2005 and 21,825 in January this year, although there are considerable monthly fluctuations.
A CML spokeswoman said: “The number of cash purchases has not changed very much. Property transactions are lower than a few years ago, so cash purchases account for a higher proportion of sales than previously.”
The group does not hold data on who these cash buyers are, but it said the majority were likely to be older people who had paid off their mortgage and were now trading down to a smaller home, either to release equity or live in a property of a more manageable size.
It said others were likely to be people, such as entrepreneurs, who had been successful enough to accumulate sufficient cash to trade up the property ladder without the need for a mortgage.
Overseas buyers are also thought to account for some cash purchasers, particularly in certain areas of the country, such as London, as people who live abroad look to take advantage of the weakness of sterling.
The figures come as the British Bankers' Association said the number of mortgages approved for house purchase rose to an eight-month high of 31,660 in March.
There are currently five people chasing every room that is available to rent as tenant demand continues to soar since the economic downturn.