Cash buyers are king thanks to rate rise

Since December of last year mortgaged transactions have fallen by a third – suggesting that cash buyers have far less competition thanks to successive base rate rises, Octane Capital research shows.

Since the first of six consecutive base rate increases was implemented in December of last year, there have been an average of 37,019 homes purchased each month with the help of a mortgage.

This is a -33% drop when compared to the monthly average of 55,070 per month purchased in the four months prior to this interest rate increase.

At a regional level, the North East has seen the largest reduction in mortgage market activity from buyers, with mortgage-fuelled purchases falling by -39%, followed by the East Midlands (-36%).

Octane Capital looked at the average monthly level of mortgage backed transactions between December of last year and March this year, which they compared to the four months prior (August 2021 to November 2021).

Jonathan Samuels, chief executive of Octane Capital, said: “Following the Bank of England’s decision to first increase interest rates in December of last year, there was an almost immediate retraction in market activity coming via the mortgage sector.

“This was to be expected given the fact that it was the first base rate increase since November 2017 and particularly given the backdrop of wider economic uncertainty and the cost-of-living crisis.

“We now know that this was just the tip of the iceberg with respect to increasing interest rates and this latest insight into declining mortgage sales volumes doesn’t yet account for the base rate hikes seen in May, June or August.

“So we expect the decline in market activity coming from mortgage backed homebuyers to be significantly lower still when these figures are finally released.”

At local authority level, mortgage market activity has fallen to the largest extent in Teignbridge, Newark and Sherwood and Tewkesbury, which have seen a -49% decline.

Runnymede, North Norfolk, South Holland and Allerdale also make the top 10 with a -47% drop, as do Bolsover (-46%) and Peterborough (-46%).

The average monthly number of homes purchased with the help of a mortgage has declined across every single local authority since the Bank of England first increased interest rates.

Comments 1

  1. I think the rate rise has nothing to do with it. Cash has always been king in any transaction. Vendors have always traditionally favoured cash buyers as the transaction will normally proceed with less hassle.

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