Persimmon Plc is the latest homebuilder to warn about a collapse in first-time buyer deals, as high mortgage rates weigh on Britain’s housing market.
(Bloomberg) — Persimmon Plc is the latest homebuilder to warn about a collapse in first-time buyer deals, as high mortgage rates weigh on Britain’s housing market.
The company said sales to first-time buyers are proving more challenging than other transactions, according to a statement Wednesday. The note of caution comes as higher mortgage rates, a cost-of-living squeeze, and the end of the Help-to-Buy program weighs on demand.
This reflects “stretched affordability and reduced mortgage availability at higher loan-to values, particularly in regions with higher house prices,” the firm said in the statement.
Britain’s housing market is the midst of slowdown triggered by higher borrowing costs and the threat of a drop in house prices. Some homeowners are having to slash their spending on other expenses to cover higher monthly bills, while many prospective buyers are avoiding entering the mortgage market altogether.
That’s contributed to Persimmon’s weekly private net sales rate dropping almost 40% year-on-year to 0.62 in the first three months of 2023. Tougher economic conditions have also cooled build rates, which dropped 30% in the period to 176 equivalent units per week.
Still, mortgage rates are slowly declining after spiraling to 14-year highs last year. The average two- and five-year fixed-rate deals were down to 5.24% and 4.96%, respectively on Tuesday, according to Moneyfacts Group Plc.
That’s prompted Persimmon to note signs of improvement, with the homebuilder now expecting to sell toward the top end of its previously forecast 8,000 and 9,000 homes in 2023. The company reported an uptick in demand for three, four and five bed homes so far this year — which are properties often associated with less debt-reliant buyers.
“Trading over recent weeks has offered some signs of encouragement with visitor numbers up, cancellation levels normalizing and sales rates continuing the steady improvement evident since the start of the year,” Chief Executive Officer Dean Finch said in the statement.
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