Persimmon under increasing pressure as rate rises crimp housing demand
UK housebuilder Persimmon is expected to report a fall in revenue in its half-year update on Thursday as the sector comes under increasing pressure from higher mortgage costs.
The FTSE 100 firm is expected to see revenue decline to £1.11bn, down from £1.69bn for the same period last year, according to CMC Markets.
In its update for the first quarter this year, posted in April, Persimmon said forward sales had dropped 30 per cent to £1.7bn.
However, despite the disappointing results and bleak outlook for the sector, the company said at the time that it was still confident of meeting its full-year targets.
“Back in July Persimmon shares hit their lowest levels in 10 years as concern over higher interest rates and lower demand weighed on the outlook for the UK’s house building sector,” Michael Hewson, chief market analyst at CMC Markets, said.
Its share price has fallen some 20 per cent over the past 6 months, and is now trading at 1,147.50p.
Housebuilders have come under increasing pressure as the Bank of England hikes interest rates, now at 5.25 per cent, to tackle inflation. This has increased the cost of mortgages – a two- year fixed mortgage now well over six per cent – and, as result, has led to reduced demand for new homes.
Last week, fellow housebuilder Taylor Wimpey reported a fall in pre-tax profit for the first half of the year, dropping to £237.7m, down from £334.5m during the same period in 2022.