UK homes will remain affordable despite rising rates, says Barratt CEO

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A sign of Barratt houses is seen in a housing estate in Barratt near Haywards Heath, Britain February 20, 2020. REUTERS/Peter Nicholls

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  • HY pre-tax profit rises 0.6% to £432.6m
  • Targets home completions of up to 18,250 homes for the fiscal year
  • Shares rise up to 4% in morning trading

Feb 9 (Reuters) – British homes are likely to remain affordable and demand will remain strong despite a rising interest rate climate, the director of Britain’s biggest homebuilder Barratt said on Wednesday (BDEV.L) .

His comment comes amid signs of a possible lull in a housing market boom amid potential mortgage rate hikes and a growing squeeze on the cost of living, although many London-listed homebuilders predicted persistent robust demand over the medium term.

The Bank of England last week hiked interest rates for the second time in two months, with nearly half of its policymakers calling for a bigger hike to contain endemic price pressures, a policy move that could indirectly weaken demand in the housing market. Read more

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But Barratt CEO David Thomas said increased levels of household savings during the pandemic have helped consumers reassess their options, leading to higher transaction levels, and purchasing power is remained solid.

“Consumer affordability is relatively good and that’s because interest rates have been and continue to be so low,” he told Reuters. “So once we understand that interest rates are rising – and we saw an increase in the base rate last week … affordability remains above historical benchmarks, but we will clearly keep that going. study.”

Barratt shares gained up to 4% in morning trading after forecasting to build up to 18,250 homes in fiscal 2022, 250 more than its previous outlook, which would also top volume levels before the pandemic.

The homebuilder posted a roughly 1% rise in its half-year pre-tax profit to 432.6 million pounds ($586.30 million) and also announced an interim dividend of 11.2 pence per share, against 7.5 pence a year earlier.

“Barratt continues its flawless delivery with strong first-half margins, an increase in volume guidance for the year and the introduction of a gradually reduced dividend hedge,” Deutsche Bank analysts said in a note.

The FTSE 100 company said total forward sales as of January 30 were 4.11 billion pounds, up from 3.43 billion pounds a year earlier.

Barratt’s smaller rivals Persimmon (PSN.L) and Taylor Wimpey (TW.L) predicted strong demand last month would continue, while midsize players Bellway (BWY.L) and Vistry (VTYV .L) reported healthy trading on robust demand. Countryside Properties (CSPC.L) unexpectedly reported a weak quarter.

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Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Rashmi Aich and Nick Macfie

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