The boss of the UK’s biggest housebuilder has warned the property market will remain ‘choppy’ until interest rates settle – as it forecast a dramatic 20 per cent drop in sales this year.
Rob Perrins, Berkeley’s chief executive, said house buyers need more certainty of how high rates could go before making a decision on a property.
But mortgage rates are turbulent, soaring in recent weeks as the Bank of England’s attempts to reduce stubbornly high inflation which has fed through into lending deals.
Alarm: Berkeley chief exec Rob Perrins (pictured), said house buyers need more certainty of how high rates could go before making a decision on a property
To make matters worse, inflation unexpectedly remained at an annual rate of 8.7 per cent in May, adding to the pressure on the Bank of England to increase the cost of borrowing further today.
Perrins said yesterday: ‘The housing outlook is going to be choppy for a while until interest rates settle, which brings confidence back into the market.’
The FTSE 100 group posted a 15 per cent slump in new home sales in the 12 months to April while spooking investors further by forecasting a 20 per cent fall for next year.
The grim predicament sent shares in Berkeley down 1.6 per cent, while rivals Barratt, Persimmon and Taylor Wimpey also fell between 3.5 per cent and 4 per cent.
An interest rate hike today would drive up the cost to remortgage for the 800,000 homeowners who need to secure a new deal this year, and will also put off buyers.
Consistently high inflation has meant a sharp rise in mortgage rates in recent weeks, pushing the average interest on a two-year fixed loan above 6 per cent.
Concerns: Berkeley, which focuses on redeveloping land that was previously used for industrial purposes, said it will remain cautious about new investment due to volatility
And it means the estimated 1.6m households coming off fixed-rate mortgage deals next year could face an added bill of almost £3,000 each year.
Several High Street lenders have already pre-emptively raised rates, with NatWest increasing many of its two and five-year deals by 30 basis points overnight.
Berkeley, which focuses on redeveloping land that was previously used for industrial purposes, said it will remain cautious about new investment due to volatility.
For the year ending April 30, Berkeley profits were £604million, up from £551.5million the previous year, amid a strong performance until market turbulence hit in September after the mini-Budget.
