Mortgage-backed homebuyers dominate even as rates have surged - claim

Mortgaged buyers have continued to drive the property market even in the two years since mortgage rates peaked, research suggests.

Property brand Knight Frank has looked at how different parts of the housing market have performed since inflation, mortgage pricing and interest rates rose in Spring 2022.

Tom Bill, head of UK residential research at Knight Frank said the analysis suggests cash buyers didn’t have a particularly obvious impact as borrowing costs spiralled for borrowers.

The research ranked all local authorities by their percentage of cash buyers in the two years to April 2024, there was only a small difference between the top and bottom of the list.

The 25 areas with the highest proportion of cash buyers experienced an average decline in sales volumes of 24% versus the two-year period to April 2019. In the 25 local authorities with the lowest ratio of cash buyers, the equivalent fall was 27%.

The highest percentage of cash buyers was in North Norfolk (60.3%) while the lowest was Barking and Dagenham (8.5%). The local authority where transactions held up best was Kensington & Chelsea (+11.3%), where 54.7% of buyers paid in cash.

Meanwhile, prices increased by an average of 1.4% in the two years to April 2024 in the top 25 areas for cash buyers while the equivalent rise was 0.9% in the bottom 25 locations.
Bill said: “Despite cash buyers having the advantage, the figures underline how the tempo in residential markets is largely set by leveraged buyers.”

He also suggested that stress-testing rules for mortgage borrowers introduced after the global financial crisis in 2008 appear to have done their job, underlined by the fact 77% of local authorities saw prices rise over the two-year period.

However, he says affordability remains an issue for buyers and has contributed to a fall in transactions.

Bill added: “Back in Spring 2022, it would have been a fair assumption that the UK housing market would perform worse than it did as mortgage rates more than quadrupled.

“Prices held up better than sales volumes but the recovery in transactions should accelerate after what could turn out to be a pivotal month.”