It’s a start, says Bellway director

Dec 7 2007 by Andrew Mernin, The Journal

HOUSEBUILDER Bellway has welcomed the 0.25% interest rate cut – after earlier saying reservations were down by 7% on this time last year.

The Bank of England’s interest rate reduction will knock about £16 a month off the cost of a typical £100,000 mortgage if the cut is passed on in full.

Newcastle developer Bellway welcomed the cut, the first in two years, but warned that more needed to be done to boost customer confidence in the property market.

Finance director Alistair Leitch said: “Obviously anything that helps the home buyer is to be applauded, but a quarter percent is neither here nor there. On a £150,000 mortgage it makes a difference of about £22 a month.”

He also said he would have preferred the Bank to have done a quarter percentage cut with a promise of an additional cut within the next two months.

Meanwhile, the firm said yesterday that reservations were 7% lower than a year ago after the credit crunch caused nervous consumers to put off house purchases.

The company, which employs 2,000 staff across 18 regional offices, warned the outcome for its financial year to July 31 would depend on conditions during the key spring selling season.

The company said in a trading statement: “While the supply side of house building remains constrained by planning, product and construction starts, the demand side is now being affected by a lack of consumer confidence and the economy generally.”

Bellway said its strong forward sales position should allow the company to deliver modest growth in sales volumes for the six months to January 31.

But since the middle of October – when Bellway reported a 6.4% rise in pre-tax profits to £234.8m – reservations have fallen below last year’s level. The figure showed a 7% fall in the four months to the end of November.

The company added: “The group believes that it can still deliver a small increase in volume supported by a rise in the number of outlets available in early 2008.”

The company has built more than 100,000 homes since it was founded in 1946.

In the last financial year, Bellway said Yorkshire, the North-West and the Midlands saw a tightening in demand, with the market increasingly turning to the use of incentives in order to maintain volumes.

The company’s divisions in Scotland, the North-East of England and in and around London traded well during the period, it added in October.

Bellway said yesterday: “The size of the current forward order book puts Bellway in a strong position, but the final outcome for the year ending July 31 will have to be reviewed in light of conditions prevailing in spring 2008.”