High mortgage rates are leading to a surge in cash purchases of buy-to-let properties in Great Britain, according to data from Hamptons.

The shift towards cash purchases is particularly pronounced in Southern areas of the country, where yields tend to be lower. So far this year, 61% of investor purchases in the four Southern regions (London, South East, South West and East of England) were made in cash, up from 47% in 2022.

In contrast, cash purchases have fallen slightly year-on-year in the North of England, from 62% in 2022 to 60% in 2023.

Higher interest rates are making it harder for buy-to-let sums to stack up, particularly in low-yielding areas of the country that generate smaller rental returns. This means that more investors are turning to cash to fund their purchases, as they may find it difficult to pass a lender’s stress test.

The average landlord who bought a buy-to-let in the South of England during the last 12 months achieved a 5.4% gross yield, lower than some mortgage rates, compared to 7.5% for those who bought in the North.

In London, which has the lowest yields in the country, the share of buy-to-lets bought with cash has risen to a record 67% so far this year, up from 43% in 2022. However, the average budget for investors has shrunk, with the average investor spending £341,000 on their new buy-to-let in the capital this year, down from £450,000 in 2022.