One of the largest homebuilders in the UK, Taylor Wimpey, has warned that the Bank of England's method of curbing inflation by raising interest rates has weakened the housing market, making home sale prices difficult to afford.
In July, the net sales rate of private homes at Taylor Wimpey dropped from 0.57 units per week last year to 0.47 units, while the cancellation rate rose from 19% to 24%. Additionally, over the past six months, the builder's revenue fell by 21% to £1.6 billion, and pre-tax profits decreased by 19% to £237.7 million, but the average selling price of houses increased by 6.7% to £320,000.
Jennie Daly, CEO of Taylor Wimpey, stated that although there is still a high interest in the real estate market from buyers, the lower booking volume compared to the average of the recent years indicates that the rise in mortgage rates is exacerbating the burden of purchasing homes for consumers. Jennie mentioned that although mortgage rates in the UK have fallen from their peak at the end of last year, the Bank of England's interest rate hike in June could lead to an increase in mortgage rates again in the second half of this year.
On Tuesday, the Nationwide Building Society reported that due to the drag of rising mortgage rates driven by higher interest rates, UK house prices fell last month at the fastest rate in 14 years, and economists expect further declines in house prices in the future.
Encouragingly, the cost of raw materials and labor has eased, and the inflation of new construction costs, which was detected at a level of 9% to 10%, has now dropped to 6%. Taylor Wimpey expects this figure to decrease further in the coming months.
Moreover, despite the Trades Union Congress urging the Bank of England to halt interest rate hikes and warning that widespread unemployment in recent months has left the UK on the verge of recession, financial markets expect the Bank of England to further raise benchmark interest rates at this week's meeting.
