Across Great Britain, 59% of buy-to-let purchases have been made with cash so far this year, which is 6% higher than the same period a year ago. It is also the highest share of buy-to-let purchases made with cash in six years. This si accordng to Hamptons Letting Index for February.

The Index revealed that 61% of investors who bought a buy-to-let property in the South of England used cash, which was a new high. This is also up from a low of 47% in 2022. And London saw the largest increases, 67% of buy-to-let purchases in London were mortgage-free, 23 per cent more than in 2022. 

Nearly all regions showed a rise in purchases being made with cash rather than a mortgage, except for the North West which recorded a 2% fall to 61%, and the North East which saw a 3% drop to 52%. 

Hamptons said this was because yields tended to be higher in these regions, so investors were more likely to pass lenders’ stress tests and still make money with a mortgage. 

Aneisha Beveridge, head of research at Hamptons, said: “Against a backdrop of higher mortgage rates, investors are adapting. So far this year, 12.1% of homes sold in Great Britain were purchased by a buy-to-let landlord, the same level as in 2022.   

“While existing investors are paying down debt, new investors, particularly those wanting to buy in the lowest yielding parts of the country, are choosing cash to ensure the sums stack up. Overall, this is set to shrink the total mortgage bill for buy-to-let in 2023.” 

More cash purchases in lower yield regions 

The average gross yield for a landlord buying a property in the South of England over the last 12 months came to 5.4%, which is lower than some recent mortgage rates. 

The latest data from Moneyfacts showed that as of March, average rates for buy-to-let mortgages stood at 5.81% for a two-year fix and 5.72% for a five-year fix. 

In the North, the average yield over the last 12 months has come to 7.5%. 

The Index found that in regions where the average yield was less than 5%, 71% of purchases so far this year were being made with cash. This is up from half in 2022. 

In regions where the average yield is higher than 8%, more mortgaged purchases are being made. 

Rents on the rise

London saw the largest growth in average rents with a 14.4% annual increase to £2,882 in inner London and a 13.8% growth to £2,026 in Greater London. On the whole, average rents in the capital rose by 13.8% or £262 to £2,161. 

This was followed by the Midlands and the North, where rents rose by 10.7% and 9.3% respectively to £870 and £824. 

Beveridge added: “Rental growth accelerated last month, marking the second strongest rate of growth recorded since our lettings index began. While the number of rental homes coming onto the market rose for the fifth consecutive month, unlike in the sales market, demand from new renters remains up year on year too.”