No Mortgage Cash Buyer Property High

No Mortgage Cash Buyer Property High.

According to figures released by nationwide this week, the number of people buying a property without a mortgage i.e. cash buyers has hit a record high.

Nationwide suggests that nearly 40% i.e. 4 out of every 10 homes were bought in the last year with no mortgage.

Why is this?

To be honest, we don't know. Interest rates are at an all-time low so money can be borrowed cheaply. Likewise, interest rates for savers are exceptionally low and we suggest this is the driving force as investors perceive that they can get a better return on their savings by buying a property and achieving yields of between 5% and 10% from rental income on their property investment.

In addition, borrowing money has become more difficult with the introduction of the Mortgage Market Review (MMR) on April Fools' Day last year. Under MMR, your mortgage broker and the mortgage lender must not only assess suitability of a mortgage product but must also assess affordability of mortgage payments not just today but also with additional stress tests for affordability of mortgage payments if interest rates rise, the cost of living rises and your income falls. This means that some people may be making the decision to save hard or release cash from other assets such as the new pension flexibility rules to buy property outright.

We believe though the likely culprit is poor returns on savings interest with the savvy investor looking at property rental yield as well as the potential for capital growth over the medium and long term, although we suggest many may not have taken into account the fact that capital gains tax is payable when you sell an investment property. In addition, we have suggested in a previous story this week that the investment property and buy to let property market could be rich pickings for HMRC with a change to taxation and the possible introduction of a wealth tax.