(Alliance News) - Housebuilder Persimmon PLC on Thursday said its sales rate has weakened as the UK housing sector grapples with interest rate rises, higher mortgage rates, and tumbling consumer confidence.

Persimmon said its forward sales position stood at GBP1.0 billion at the end of last year, down 36% from GBP1.6 billion at the end of 2021. Its cash position at December 31 fell 31% to GBP860 million from GBP1.25 billion at December 31, 2021.

The company noted that in 2022, higher mortgages and inflation as well as market uncertainty had a "sharp impact".

"Taking together the absence of Help to Buy and the increase in mortgage rates, we estimate that the monthly cash cost of mortgage payments for some first time buyers has approximately doubled over the past year compounded by limited availability of high loan to value mortgages."

Help to Buy is a UK government support scheme for first-time home buyers running from April 2021 to end of March 2023. However, applications needed to have been made by October 31, so wasn't open to new buyers in November and December.

"The end of the Help To Buy scheme in March 2023 will affect Persimmon more than other major developers because they build more houses in affordable areas and their average home price is much lower," commented Zainab Atiyyah, an analyst at research house Third Bridge. "They should now focus more on larger units targeting mid-market buyers.”

Persimmon Chief Executive Officer Dean Finch said: "In the second half of the year, rising interest and mortgage rates, inflation and weaker consumer confidence began to impact customer behaviour across the housing market. This change in market conditions gathered pace in the fourth quarter and is reflected in the reduction in our recent weekly sales rates and a lower forward sales position as we enter the new financial year."

In 2022 the company completed 14,868 house completions, slightly up from 14,558 in 2021. The average selling price increased by 4.9% to GBP248,600 from GBP237,078.

Looking ahead, Persimmon said the longer-term outlook for new homes remains favourable.

The company will release its 2022 results on March 1.

Persimmon shares were 5.1% higher at 1,362.00 pence each in London on Thursday morning.

By Tom Budszus, Alliance News reporter

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