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How to get the best mortgage deal as cash buyers flee the market

More than 70% of homes are now bought with mortgages

The proportion of homes bought outright with cash have hit the lowest level in at least a decade, as buy-to-let investors continue to feel the financial strain.

That’s according to new data from the estate agency Hamptons International, which shows that more than 70% of homes bought in the first half of 2018 were purchased with a mortgage.

As the market for landlords quietens, this means, potentially, there are more properties available to residential homebuyers, who need to borrow to buy their homes.

Find out why cash buyers are fleeing the market, and what you can do to make sure you find the best mortgage deal.

  • If you’re buying a home and need some advice on your mortgage options, call Which? Mortgage Advisers on 0800 197 8461.

Buy-to-let cuts influencing cash market

Just 30% of homes bought in England and Wales in the first half of 2018 were purchased without a mortgage, the lowest proportion since Hamptons began keeping records in 2007.

In the last 12 months, £21.5bn was spent by cash buyers on a total of 113,490 homes. That’s down 21% on last year’s figure.

Hamptons puts this down to a drop in purchases from buy-to-let investors, who accounted for just 24% of cash purchases, a considerable drop from the 43% recorded a decade ago.

This suggests that tax changes brought in to cool the buy-to-let sector in recent years have had a noticeable effect on the market.


70% of homes bought using a mortgage

The chart below shows how the number of homes bought with a mortgage in England and Wales has crept above 70% for the first time since Hamptons began recording data in 2007.

As you can see, aside from a brief resurgence in the first half of 2017, the proportion of homes bought by cash buyers has been steadily dropping since 2013, perhaps influenced by more first-time buyers getting on to the ladder after the introduction of the Help to Buy scheme.

The figures are a far cry from those recorded around the time of the financial crash, when cash buyers bought more 38% of homes as mortgage lending dropped dramatically.

South West of England the home of cash buyers

This data is a testament to an ever-changing market for both owner occupiers and buy-to-let investors, and that’s not just on a national level.

The percentage of homes bought with a mortgage varies wildly around the country, from just 63% in the South West of England to 79% in London.

Are mortgages getting cheaper?

So if you’re looking to buy a home, is now a good time to take out a mortgage?

Broadly speaking, the answer is yes. While fixed-rate deals (shown by the red and green lines in the graph below) are significantly higher than the record lows seen in October last year, they still remain very attractive, with average rates of 2.49% for a two-year fix and 2.91% for a five-year fix.

In the last few months, the gap between the cost of two- and five-year deals has closed, as lenders look to tempt homebuyers and remortgagers into fixing for longer.

There are also more products coming on to the market now for buyers with small deposits, with larger lenders either refreshing or re-entering the 95% mortgage market.

As the chart shows, tracker deals remain cheap despite increasing in cost significantly after the Bank of England increased the base rate in August – but with the prospect of more rate rises on the horizon, tracking isn’t right for everyone.

Getting a good mortgage deal: five tips

There are in excess of 6,000 owner-occupier mortgage deals and 1,000 buy-to-let deals out there at the moment, which means it can be difficult to find the right product.

As a starting point, follow these five tips:

  1. Use a broker: whole-of-market mortgage broker can look at the entire mortgage market and hone in on the right deal for you. There’s also a chance to get a better deal, too, as some products are only available through intermediaries. A good broker should also be able to inform you if the right deal can be found by going directly to a bank yourself.
  2. Don’t stick with your current bank: brand loyalty is a big mistake when it comes to mortgages, regardless of how happy you are with your current bank. There are more than 50 lenders out there offering mortgages, so chances are the very best deal won’t be with your current bank.
  3. If you’re on an SVR, switch: if you’ve currently got a mortgage that has lapsed on to your lender’s standard variable rate (SVR) or is about to, then it’s important to consider switching immediately. Our research found that the SVR rate could cost you as much as £4,000 a year more than you’ll pay on a fixed-rate deal.
  4. Don’t rule out building societies: many building societies offer deals across the UK, rather than just the area in their name. Smaller building societies also lend differently to banks, so if you’ve got a more tricky application or a less than ideal credit history, you might find a building society less likely to operate a ‘computer says no’ policy than a larger bank.
  5. Read our mortgage lender reviews: it’s not all about the best price – you’ll also want to ensure you’re getting the best service. We’ve rated all of the major mortgage lenders based on customer satisfaction. Get our verdict in our best mortgage lenders guide.

Finding the right mortgage for you

If you need some advice on your mortgage options, you can call Which? Mortgage Advisers on 0800 197 8461 or fill out the form below for a free call back.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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