Buying Home With Mortgage Or With Cash, Which?

Buying home with mortgage or with cash, which do you think should be ideal for you?

This question has become germane on account of recent developments in the property market generally, and the home ownership subsector particularly.

Those who don’t need to borrow to purchase a home pay 13 per cent less than those taking out a mortgage, according to analysis by MPowered Mortgages of Land Registry data.

Its analysis of completed sales from September found that across the UK, cash buyers typically paid £28,189 less per property.

This equates to an average discount of 9.3 per cent on the asking price.

This ‘cash buyer discount’ has risen by 12.4 per cent compared to September 2022, when Liz Truss’s mini-Budget slammed the brakes on the property market.

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Cash is king: Cash buyers are commanding discounts of 13% compared against the typical purchaser with a mortgage, according to analysis of Land Registry data

Cash is king: Cash buyers are commanding discounts of 13% compared against the typical purchaser with a mortgage, according to analysis of Land Registry data

So, the question is, buying home with mortgage or with cash, which? Why do cash buyers pay less for homes?

Cash buyers are more appealing than mortgaged buyers, as the mortgage is one aspect of a property purchase that can go wrong.

They are therefore perceived by sellers and estate agents to offer greater certainty – and a higher chance of a successful sale.

The mortgage can also be lengthy process, which can slow down house sales. A cash buyer can therefore also offer buyers a speedier move.

Their numbers are also dwindling, which only increases their negotiating power. MPowered’s analysis found that cash buyers now account for barely a fifth of home purchases in Britain.

Cash buyers made up 22.4 per cent of transactions in September, according to the Land Registry figures, down from 28.6 per cent two years ago.

Stuart Cheetham, chief executive of MPowered Mortgages believes this combination of scarcity and speed enables cash buyers to pay less for the home they want.

‘As the property market heats up and interest rates fall, the number of house hunters using a mortgage to fund their purchase is surging and cash buyers are becoming relatively rarer,’ said Cheetham.

‘Then there’s the trump card that cash buyers can play – speed. 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.

‘That’s why buyers who have their finance fully in place when making an offer are vastly more attractive to sellers than those who don’t.

‘Sellers will often accept a lower offer in return for the extra certainty these buyers represent.

‘If you’re not fortunate enough to have the money to buy the home you want outright, you can give yourself almost the same leverage by having a fully underwritten mortgage offer.’

For you, which is it, buying home with mortgage or with cash, and where cash buyers are bagging the biggest discounts?

The discounts are considerably higher in northern parts of Britain, according to MPowered’s analysis.

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It found cash buyers enjoy the biggest discounts in North West England, where they typically pay £31,827 (13.4 per cent) less than buyers using a mortgage.

In Scotland the average ‘cash discount’ is £26,476 (12.8 per cent), and in North East England it is £22,122 (12.4 per cent).

Further south, the discounts reduce. In the South East, mortgaged buyers paid £392,021 on average in September compared to £364,232 among cash buyers – a 7.4 per cent discount.

In the South West, the average mortgaged buyer paid 3.7 per cent more than their cash buying counterparts – a cash discount of less than £12,000

Money off deal: Cash buyers are commanding discounts of 13.4% in North West England and 12.8% in Scotland

Money off deal: Cash buyers are commanding discounts of 13.4% in North West England and 12.8% in Scotland

As to buying home with mortgage or with cash, the only place where cash buyers don’t enjoy lower prices is London.

In September 2024, cash buyers in the capital paid £15,344 more per property than those using a mortgage, a reflection of the high numbers of foreign property investors – who invariably pay cash – buying homes there.

The discrepancy in London is also likely accentuated by the high concentration of cash buyers operating in inner London, where property prices are highest.

In inner London, cash buyers paid £644,481 on average per property compared to £586,593 among mortgaged buyers in September.

However, it’s worth pointing out that London’s overall ‘cash premium’ of 3 per cent has nearly halved since September 2022.