Bellway says new home sales to fall after jump in mortgage rates

Bellway has said it will build fewer homes this year due to a sharp slowdown in the property market after significant increases in mortgage rates.

The FTSE 250 housebuilder told shareholders on Wednesday that it expects sale completions to “decrease materially” due to weaker order numbers and “low reservation rates”.

It comes after 14 consecutive increases in interest rates, which have risen to a 15-year high of 5.25% and pushed mortgage costs higher for homeowners.

Jason Honeyman, group chief executive of Bellway, said conditions in the property market are therefore “likely to remain challenging in the near term”.

Bellway said that recent increases in mortgage rates in June and July particularly weakened demand.

It came as the company revealed it built 10,945 properties in the six months to July 31, falling just short of its guidance of 11,000.

The Newcastle-based firm reported housing revenues of around £3.4 billion for the half-year, down from £3.52 billion over the same period last year.

Operating margins also weakened over the six-month period amid the combined impact of softer demand and continued cost inflation in building homes.

Mr Honeyman said: “Bellway has delivered a resilient performance, with volume output and housing revenue in line with expectations and supported by the strength of our order book at the start of the 2023 financial year.

“In a challenging operating environment, the result has also been achieved through the dedication of our colleagues, subcontractors, advisers, and supply chain partners.

“Bellway’s operational strength and experienced teams will enable the group to successfully navigate changing market conditions and, supported by a strong balance sheet, it is well-placed to continue to deliver high quality homes to our customers and returns for shareholders.”

Shares in Bellway were 2.3% lower after early trading on Wednesday.