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395,000 homebuyers will not need a mortgage

Just 13% of the three million people planning to buy a property between February and July claim they won’t need a mortgage, research from mform.co.uk reveals.

A similar number are undecided as to whether they will need a loan to purchase their home.

mform.co.uk says that although cash buyers will include the wealthy – some of whom have benefited from massive city bonuses – the vast majority will be downsizing to purchase a cheaper property and plan to spend or invest the remaining equity in their home.

Department of Communities and Local Government figures show the average house is now worth £205,286 compared with £156,275 in July 2003, which is equivalent to 30% growth in three-and-a-half years.

Older homeowners are likely to be the main beneficiaries with 49% of people aged 50 and over who were interviewed and are planning on buying a new home, claiming they will not need a mortgage.

Only 6% of homebuyers aged between 30 and 50 said they could afford to buy without a mortgage, while for those 29 and under the figure was as low as 1%.

Eamonn Rice, chief executive of mform.co.uk, says: “Property prices are such that many people cannot afford a home but rising property prices has meant that many people have become well-off and a number are cashing in on this by purchasing cheaper properties and releasing equity.

“Anyone who bought a house in the 1980s is certain to have seen massive growth in the value of their home and may now be in a position to cash in and move to a smaller house or relocate to a cheaper area. Downsizing makes financial sense.

“Cash buyers are set to play a significant role in the housing market over the next six months and those who aren’t lucky enough to be mortgage-free need to take note.

“Cash buyers are in the comfortable position of not having to worry about mortgages and can take a more relaxed attitude to buying and selling.

“As they are generally not in a chain their deals can go through more smoothly and they are inevitably more popular with sellers and estate agents.”

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