Demand for new build homes slows amid market uncertainty

The warning comes from Barratt Developments in its trading update today. Demand for new-build houses in the UK is slowing, according to Barratt Developments, the country’s largest housebuilder.

In the past financial year buyers reserved an average of 281 homes per week, this financial year to date the average figure has fallen to 188.

David Thomas, Chief Executive at Barratt Developments, said that the slump in sales was due to the “wider economic uncertainty” across the market.

Recently, Chancellor Kwasi Kwarteng’s mini-Budget announcement saw the pound fall to a record low against the dollar and prompt many mortgage lenders to remove their products from the market.

Since the mini-Budget, mortgage products have slowly returned to the market but are still some way off the numbers seen before Kwarteng’s fiscal event.

According to Moneyfacts data, there were 3,961 mortgage products on the morning of the mini-Budget. Today this figure stands at 2,969.

In addition to recent events, inflation reached a 40-year high this year and the Bank of England made seven consecutive base rate increases.

Rising interest rates

In its trading update, Barratt Developments noted that mortgage rates have a significant impact on the health of the housing market.

"The outlook for the year is less certain with the availability and pricing of mortgages critical to the long-term health of the UK housing market," Barratt Developments said.

Russ Mould, Investment Director at AJ Bell, said higher mortgage rates could raise the average selling prices of new developments.

“The FTSE 100 firm’s average selling price on its order book is now £377,200, nearly 12 times the average UK annual salary,” he said.

According to Moneyfacts data, average mortgage rates have only continued to rise.

On 5th October 2022, the average two-year fixed deal surpassed 6% for the first time since November 2008. A day later, the average five-year rate passed the same milestone for the first time in over 12 years.

Today the average two- and five-year fixed mortgage rates stand at 6.46% and 6.32% respectively. The last time both these averages were higher was in 2008, the year of the financial crash.



Michael Brown