Bellway sees ‘encouraging’ signs after mortgage rates drop

Housebuilder Bellway said it has seen “encouraging” signs that buyers are coming back to the market after mortgage rates started to fall.

The company said that after a bruising six-month period which saw housing revenue drop by around 30% to £1.25 billion, people are starting to buy again.

Around 0.59 homes were bought at every Bellway site every week in January this year, compared to just 0.45 homes in the same month a year ago.

“Affordability steadily improved throughout the period, driven by wage increases, the easing of consumer price inflation and a gradual reduction in mortgage interest rates,” Bellway said.

“This, together with good availability of mortgage products, has helped to improve overall customer demand since the summer of 2023, although affordability constraints remain relatively acute for those customers requiring higher loan-to-value mortgages.”

The Bank of England started hiking base rates, which influence mortgage interest rates, in December 2021 in a bid to help control runaway inflation.

The Bank’s base rate appears to have peaked at 5.25% where it was set in August. The rate has not yet been cut but in anticipation of future reductions, mortgage rates have started falling.

Bellway said that it had completed the construction of 4,092 homes in the six months to the end of January, a fall of around 1,600 from the same period a year earlier.

They sold for an average of £309,300, down from £316,929.

“Bellway has delivered another resilient performance in a period of challenging trading conditions,” said chief executive Jason Honeyman.

“While the economic backdrop remains uncertain, the gradual reduction in mortgage interest rates through the first half has eased affordability constraints and we are encouraged by the seasonal pick-up in customer leads and an improvement in reservations since the start of the new calendar year.

“We have maintained balance sheet resilience and, supported by the strength of our land bank, Bellway remains well-placed to capitalise on future growth opportunities and will continue to play an important role in increasing housing supply in the years ahead.”