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UK News: Uncertain year as buyers struggle with mortgages

Britain’s biggest housebuilder has warned of a tough market, with would-be buyers still struggling to secure an affordable mortgage.

With buyers taking longer to reserve a new home, Barratt Developments’ forward sales fell to 9,221 in the three months to 8 October from 13,314 a year earlier. Forward sales are agreements between a builder and a buyer to complete the sale at a specified date. At £2.4bn, they are worth £800m less than last year.

The company said the outlook for the year ahead remained “uncertain with the availability and pricing of mortgages critical to the long-term health of the UK housing market”.

UK house prices fell at the fastest annual rate in 14 years last month, as the fallout from last year’s disastrous mini-budget and the Bank of England’s successive interest rate rises fed through to the market.

Barratt also feels the absence of the government’s help -to-buy scheme, designed to help first-time buyers, which accounted for 12% of its private home sales a year ago. The last applications for the scheme had to be submitted by 31 October 2022.

Like other housebuilders, Barratt has scaled back land purchases, and it said it would stick to its “highly selective approach” over the next year.

The Barratt chief executive David Thomas said: “The trading environment remains difficult, with potential homebuyers still facing mortgage challenges.”

Mortgage rates shot up as the Bank of England raised interest rates 14 times since the end of 2021 to 5.25%. It unexpectedly kept them on hold at its September meeting, offering mortgage holders hope that borrowing costs may have peaked. Since then, several mortgage lenders have cut their rates, but they remain far higher than in recent years.

Despite the slowing market, people are also struggling with rising living costs and high asking prices, prompting a quarter of young homeowners to take out “marathon” mortgages lasting 35 years to spread out their payments and make them more affordable.

Charlie Huggins, a portfolio manager at the investment adviser Wealth Club, said: “New homebuyers are still exercising considerable caution, given the higher cost and reduced availability of mortgages.”

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