Taylor Wimpey Profits Fall as Mortgage Holders Extend Payment Periods
Profits fell by a quarter at one of the UK’s major housebuilders, Taylor Wimpey, as fewer purchases are going through in the current high inflation and mortgage rate environment. Sales at the UK’s third biggest housebuilder fell along with profits in the first six months of 2023. The sales rate dropped for private sales and bulk deals, as did the cancellation rate for the first half of this year, compared with the same period in 2022. Reservations too are below the levels seen in recent years.
The order book, which measures future sales performance, stood at £2.14bn on 2 July, a decrease from £2.8bn a year earlier. Taylor Wimpey said it planned to build 10,000 to 10,500 homes this year, compared with the 14,154 built in 2022.
Rising Mortgage Rates
Mortgage rates rose above 6% for the average five and two-year fixed deal as the Bank of England’s base interest rates were hiked to 5% in an effort to bring down inflation. The Bank is forecast to raise the rate further, to 5.25% on Thursday.
Longer Mortgages
The FTSE 100 company also reported an increase in customers extending their mortgage terms in response to higher monthly repayments. More than a quarter (27%) of first-time buyers of Taylor Wimpey houses are taking out more than 36-year mortgages, compared with just 7% in 2021. Second-time buyers too are extending their mortgages, with those taking out mortgages longer than 30 years increased to 42%, compared with 28% two years ago.
Impact on House Prices
Due to rising mortgage bills, house prices have come down. Earlier this week, Nationwide reported annual property values declined by 3.8% in July – the sharpest fall since July 2009. However, Taylor Wimpey said it was not seeing major price shifts for its houses. Pricing has “remained resilient”, the company announcement said, with the level of down valuations low.
Current Mortgage Landscape
Data from Sky News shows that mortgage holders are now in the minority in the UK, with most people either owning their home outright (33%) or renting their home (37%) – just 30% of the population are paying off a mortgage.
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