Almost four in 10 property purchases were made in cash in the first three months of 2015, according to analysis by Nationwide building society, the highest proportion since records began in 2005.

The UK’s biggest building society said cash was used to pay for 38% of home purchases in full, up from 36% in 2014. The proportion of the housing market made up by cash buyers has almost doubled since before the financial crisis, when just 20% of purchases did not involve a mortgage.

“Following the crisis there was a sharp fall in the number of mortgaged purchases,” Nationwide’s chief economist, Robert Gardner said. “Credit conditions meant that some people who wanted mortgages could not get them, but there was also less appetite because of the conditions in the labour market.”

Gardner said the number of cash purchases had remained steady over the decade 2005-2015. He said it could be set to increase as older homeowners with equity in their properties downsized, but that an improving mortgage market would mean the proportion was unlikely to grow.

While UK and overseas investors have been more active in the London market than elsewhere in the country, Nationwide said the proportion of cash buyers was in line with the overall figure.

The biggest proportion of cash buyers was in the north-east of England, followed by the south-west, could mean that people are moving out of London and paying off their mortgage when they do.

Gardner add: “The low interest rate environment is likely to have supported the flow of cash into other asset classes in recent years, including UK residential property.”



Housing transactions were down by 5% year-on-year in the first quarter of 2015, while mortgage completions had fallen by 11%.

The society’s latest monthly housing index showed that house prices in the UK rose by 0.3% in May, taking the average cost of a home to more than £195,000.



However, growth slowed from the 1% rise recorded in April, and that the annual rate of increase had fallen to 4.6% – its lowest level since August 2013 and less than half the rate it was running at in the summer of 2014.

Gardner said this meant that annual house price inflation was almost in line with expectations.

“Over the longer term we would expect house price growth to converge with earnings growth, which has typically been around 4% per annum,” he said.

“However, much will depend on supply side developments – in recent years the rate of building activity has remained well below that required to keep up with population growth.”





With interest rates so low, where else would you put your cash? Charlie Wells, Prime Purchase

Nationwide’s modest growth figure for May, which is based on homes valued by the society over the month adjusted to reflect a “typical” property, does not suggest a big bounce in prices agreed immediately after the general election.

However, economists have suggested that prices will start to rise again now that a majority Conservative government is in place. On Monday, Steven Bell, chief economist at City fund manager F&C Investments, said boom conditions had returned to the housing market.

Since then, the Bank of England has reported that mortgage approvals leapt in April, recording the biggest monthly increase since 2009.

Commenting on Nationwide’s data, Charlie Wells, the managing director of buying agency Prime Purchase, said the housing market had been “livelier” since the general election. “But the problem is stock levels: there is not a lot of property on the market. Vendors who have been sitting on their hands because of election uncertainty are not yet making the decision to sell up,” said Wells.

“Vendors may be waiting until the summer is out of the way and planning on selling in the autumn when everyone is back from their holidays so it may be too early to tell whether this situation will change. But with interest rates so low, where else would you put your cash to earn the same returns?”