Affordability pressures and soaring mortgage rates were at the forefront of minds in 2023. Against this backdrop, it is hardly surprising that home movers with no need to borrow became a more important force in the market. During the year, 34% of those who purchased a home in Great Britain did so in cash - the highest proportion since 2017.
Cash purchases tend to be most common at the more affordable end of the market. They accounted for close to half (49%) of transactions below £100,000 in 2023.
However, cash buyers also snapped up more homes valued between £500,000 and £1m than before, making up 40% of deals, against 30% in 2021 and 2022. This is the part of the market that has been most squeezed by higher mortgage rates.
Proportionately there were 5% more cash buyers in London in 2023 (compared to 2022) which was the largest increase of any region; they were responsible for almost a quarter (23%) of all London sales.
"Some among those who moved home in 2023 took advantage of the weaker market to trade down and become mortgage-free"
Owner-occupiers have traditionally been the dominant cash buyer group accounting for more than 80% of all mortgage-free deals. In 2023, as many as 43% of these buyers did not sell their home before buying another, reflecting the slower pace of the market. In 2020, 32% of owner-occupiers who acquired a new place in cash did not sell their existing property.
The main players in this segment of the market are affluent downsizers with sufficient funds to buy a cheaper, smaller home before selling their main residence.
They were a particularly powerful presence in 2023, as our research highlights. During the year, 41% of those who moved home opted for a place with fewer bedrooms, the highest number since 2016. In 2022, just 9% of those who moved home reduced their bedroom count.
Our analysis also shows that some among those who moved home in 2023 took advantage of the weaker market to trade down and become mortgage-free.
The impact of the surge in energy bills and other cost-of-living pressures is evident in the downsizers’ choice of properties: 62% traded down to a home worth - at least - half as much as their former property. Back in 2017, just 43% of downsizers opted for such a home.
It is likely that some of those who downsized in 2023 were releasing money to boost their retirement income, but others wished to free up finance to help family members onto the housing ladder.
In general, downsizers tend to favour a slower market, so that they can line up their next purchase before putting their current home up for sale. They are also reluctant to rent between moves. These factors add to the time it takes to sell a home.
Yet the time taken to complete and exchange keys is still shorter for downsizers on average at 102 days. Since 71% of this cohort purchase with cash, the transaction requires less bureaucracy than a deal where the parties are reliant on mortgages which takes 15 days longer.
However, it seems likely that 2023 was the peak year for downsizers. In 2024, as mortgage rates move downwards, and affordability concerns lessen as inflation eases, we forecast that more mortgaged buyers will re-enter the market. In particular, we predict the return of upsizers who have been all but squeezed out by higher mortgage rates.
