Nearly a quarter of all properties are bought for cash according to an article in the latest issue of the Council of Mortgage Lenders journal Housing Finance. The survey also shows that over 50% of all cash buyers have an annual income of less than £15,000, which given the age profile, is likely to be pension income.

The CML survey finds only 3% of cash buyers have an income over £50,000 compared with 13% of borrowers. This is in contrast to media reports, which associate cash transactions with high earners.

The survey also asked cash buyers how they raised the money to purchase their property. Two-thirds used equity from the sale of a previous property as the main source of funding for their cash purchase. A quarter contributed savings towards the purchase, but only 16% used savings as the primary source of finance.

A primary motivation for cash buyers was to move to a smaller or cheaper property; which contrasts with mortgage borrowers' main reason for moving which is to trade up to a larger property. For some cash buyers, trading down can eliminate monthly mortgage payments and free up remaining equity from the previous property to supplement income. However, it is also likely that older households trade down simply to move to a smaller more manageable property.

The older generation trading down account for the bulk of cash purchasers. But, among owners of second homes, there is also a higher incidence of cash buyers accounting for 35% of all purchases. This is particularly true if investors are using the proceeds of one property to fund others.

The author of the article, CML Senior Economist, Jennet Siebrits concludes: "Given the ageing population and the equity accumulated as a result of rising house prices, it is surprising that the proportion of cash buyers is not rising more rapidly."

"This may be because borrowers are choosing alternatives to trading down, such as the use of equity release products and retiring abroad. There are other reasons why cash transactions may not increase in line with demographic changes these include changes in pension provision and other alternative investment strategies."