Data from the Nationwide building society show a slight fall in house prices in May while cash buyers represent four out of ten purchases.
The number of properties purchased with cash rather than using a mortgage has increased to 38% in May 2015 up from 36% last year and this figure has almost doubled since the financial crisis.
Nationwide have published their house price index for June with the average property price in the UK of £195,055. The rise makes it harder for first time buyers to purchase their homes and home movers to move up the property ladder.
It seems to be showing a trend that properties will soon exceed their highest price ever, currently £195,166 reached last month.
For remortgage buyers higher prices give them an opportunity to release capital which they can use to improve their home.
Prices rise with fewer vacant properties
With a continuing downward trend in the increase of house prices, Nationwide’s Chief Economist Robert Gardner believes that there is a direct correlation between the supply constraints in a region and their vacancy levels.
London has the lowest level of vacancy whilst also having the most restricted supply.
Lower vacancy can lead to rising house prices since people are less inclined to sell, since they aren’t paying the bedroom tax, further restricting the supply, pushing up house prices.
Older remortgage buyers may reduce the supply of family homes on the market and avoid downsizing with the equity release buyer agreeing a lifetime mortgage to access wealth from their home.
Another statistic that the Nationwide revealed in their report is that during the first 3 months of 2015, almost 4 in 10 property purchases were made using cash, without the need for a mortgage.
More cash buyers for properties
The Nationwide report says this is the highest proportion of people buying without mortgages since their records began in 2005, and was an increase of 2% on last year, up to 38%.
Chief economist, Robert Gardner, says that even if the number of older homeowners buying with cash rises due to equity when downsizing to avoid the bedroom tax, the proportion is unlikely to change, since the mortgage market is improving.
Mr Gardner also thinks that prices will keep rising beyond the norm of 4% per annum, due to lack of a new supply of houses being built.
Other economists agree with his prediction, but for different reasons. Others believe that since a Conservative majority government is now in place, house prices will suddenly bounce upwards.
Rising house prices gives remortgage buyers the opportunity to raise capital for home improvements although buy-to-let landlords would need a larger deposit or higher rental income to buy properties.
What are your next steps?
Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.
Start with a free mortgage quote or call us and we can take your details. Learn more by using the equity release calculator, mortgage monthly cost calculator, and property value tracker chart.
For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to improve your quality of life or even help your children start or expand a business.
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