Housebuilders have shrugged off last week’s rate rise and are confident about prospects in 2007 – providing that rates remain stable for the rest of the year.
Last week the Bank of England shocked the market when it raised the rate a quarter point to 5.25%, its highest level since May 2001.
Housebuilders were expected to be one the sectors hardest hit by the rise but most played down the impact. Keith Miller, the chief executive of the Miller Group, said he was not concerned as “most buyers have factored in a rise”.
Andrew Wiseman, the chief executive of Telford Homes, believes the bank was right to act. He said: “The Bank of England has a duty to pre-empt inflation and a 0.25 rise now is better than a half-point or even a one-point rise in the future.”
However a spokesperson for Taylor Woodrow said the housebuilder was “disappointed” with the rate rise. “Our worry is on the impact on sales and confidence and that is more likely if this is the start of a series of rises.”
A 0.25 rise is better than a half-point or even a one-point
rise in the future
Andrew Wiseman, Telford Homes
This is the third rate rise since August and although housebuilders have yet to see the impact in their sales figures, recent data shows that house price inflation is starting to cool. The Financial Times’ rolling annual inflation figure, published last Friday, showed that house price inflation fell for the first time in 15 months to 6.8% in December from 7.4% in November.
Chris Millington, an analyst at Bridgewell Securities, thinks that the market is only now starting to feel the impact of earlier rises. He said: “It takes between four and six months before interest rates hit the consumer’s pocket and you would expect to see a modification of the market around now. However one rise is unlikely to upset the balance and as long as rates remain 5.25%, 2007 will be a reasonable year.”
• Crest Nicholson has finally opened its books to the Castle Bidco consortium after it increased its bid.
The bidding group, which comprises UK bank HBOS and entrepreneur Sir Tom Hunter, increased its offer to 629.7p a share including a 9.7p dividend, which the Crest board intends to recommend. The group originally tabled a bid worth 585p in November.
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