Research by Henry Dannell, the leading specialist in bespoke mortgage solutions, has revealed that the gap between the price paid by mortgage funded homebuyers and cash buyers has widened over the last year, with the average mortgage funded purchase selling for £23,782 more on average.
Henry Dannell analysed house price data for each area of Britain, dissecting the market based on the price paid by both mortgage and cash buyers and how this gap has changed versus the same time last year.
The research shows that across Britain, the average mortgage funded homebuyer currently pays £279,511 versus an average of £255,730 paid by cash buyers.
This mortgage price premium of £23,782 has increased by £2,505 in the last year alone, as the low cost of borrowing has allowed mortgage-backed homebuyers to increase their property potential and buy bigger following pandemic imposed lockdown restrictions.
The highest mortgage house price premium is currently in the North West, where the gap between the average price paid is £25,136 compared to cash buyer purchases.
The East of England (£24,307), South East (£24,147) and Scotland (£22,658) are also home to some of the largest gaps between cash and mortgage house prices.
However, London is the only region where cash isn’t king when it comes to securing a discounted purchase price. In fact, in London, the average cash house price comes in at £540,273, £31,278 higher than the average price paid by mortgage-backed homebuyers.
Director of Henry Dannell, Geoff Garrett, commented:
“Generally speaking, cash buyers sit in a far stronger position when compared to their mortgage funded counterparts and this tends to show when it comes to the price negotiated during the offers stage, with cash buyers paying a good bit less.
While the average price paid by cash buyers has increased over the last year in line with the rest of the market, its purchases funded by mortgages that have really accelerated, as the low cost of borrowing has helped many to stretch their budgets in order to secure their dream home.
However, as is often the case, London has been dancing to its own tune and we simply haven’t seen the same manic market conditions grip the capital over the last year. As a result, those that have purchased have been far more reserved when doing so and this certainly shows where the lower price paid by mortgage funded buyers is concerned.
At the same time, you also have a larger degree of high end, cash funded buyers within the London market and they are looking to transact on some of the most expensive homes in the nation. As a result, they tend to pay above and beyond average market prices and so the price paid is far higher than that of a mortgage-backed buyer.”
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