Cash buyers ‘fueling mortgage market’

Around four in ten property purchases in 2013 were completed by cash buyers as mortgage lending plays a less prominent role in the housing market.

The proportion of home purchases funded by mortgages dropped to 62 per cent last year, according to analysis by the Intermediary Mortgage Lenders Association (Imla).

At its peak in 2006, this figure stood at 76 per cent and this demonstrates the growing liquidity in the market.

Part of the reduction in mortgage lending can be attributed to the credit crunch, as it led to much tighter lending criteria, forcing many would-be buyers to save up bigger deposits.

Peter Williams, executive director for Imla, acknowledged the figures will not have that big an impact on people who are already on the housing ladder, but plenty of others are still being “shut out”.

“We are a long way from a normal mortgage market and must stay focused on improving access for responsible buyers who cannot hope to conjure up a vast sum of cash or equity,” he added.

Mr Williams pointed out the recent growth in mortgage lending – £15.5 billion was advanced by banks in January – has only been possible due to government intervention, as policies such as Help to Buy have stimulated the market by making it easier for consumers to get a home loan.

Bank of England governor Mark Carney has already stated the body cannot control the rise in London property prices due to the presence of so many cash buyers.

This demonstrates how the effect of the Bank’s main powers – raising borrowing rates or restricting conditions for mortgages – is diminished if homebuyers do not need to borrow money to fund the purchase.

Only £398 in every £1,000 spent on property in 2013 was loaned by banks and building societies.




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