Housebuilders are facing a severe squeeze on profits and sales due to the rise in mortgage costs and interest rates, investment bank HSBC today warned
Cutting its targets for a raft of sector stalwarts, HSBC said the sector is facing a “double dip in demand, further correction in house prices and a brutal squeeze on operating margin”.
Up until this point, HSBC added it had been bullish on the major builders such as Barratt Developments, Bellway, Crest Nicholson, Persimmon, Redrow and Taylor Wimpey but had now reduced its stance to just ‘hold’ across the board.
Shares in the sector tanked yesterday when the Bank of England announced it was raising the base rate to 5% from 4.5%, sparking another upward spike in the cost of taking out a new mortgage and for people with variable rate deals.
Average two-year mortgage deals are now above 6% or twice as much as this time last year.
Prices of the builders were under pressure for a second day with sector leader Persimmon down 3.5% to 1,064p, its lowest for five years, Barratt was down 2.7% at 407p while Taylor Wimpey slipped 2.3% to 100.3p.