In the first half of the year, Taylor Wimpey, the housebuilder, experienced a significant impact from soaring mortgage rates, resulting in a 21% decline in revenue.
The Chief Executive, Jennie Daly, acknowledged that the market conditions were variable during the six months leading up to June 2.
The company had an encouraging start, but the situation worsened in the second quarter when the Bank of England raised interest rates by 0.5% to 5% in response to higher than expected inflation.
Increasing Mortgage Terms in Response to Challenging Market
Taylor Wimpey noted an interesting trend among its first-time buyers and second-time purchasers.
A considerable portion of first-time buyers, 27%, opted for longer mortgage terms, exceeding 36 years, compared to just 7% in the previous year.
For second-time purchasers, the number of people taking out mortgages for over 30 years increased from 28% to 42%.
Revenue and Profits Decline, But Sales Rate Remains Robust
Despite facing a challenging market, Taylor Wimpey managed to achieve some positive results.
The company’s revenue dropped to £1.6 billion from £2.07 billion, and sale completions fell by 26% to 5,120, though this performance exceeded City expectations.
Pre-tax profits also saw a decline from £334.5 million to £237.7 million.
Current Trading Conditions and Future Expectations
Current trading conditions continue to be tough for Taylor Wimpey.
The value of the forward order book stands at £2.2 billion, down from £2.9 billion in the previous year, and reservations are below the levels observed in recent years.
However, the company believes that there is a strong underlying interest in its properties.
Taylor Wimpey expects full-year completions, excluding joint ventures, to be in the range of 10,000 to 10,500, which is at the upper end of its previous guidance.
London Market Still Shows High Interest
In London, Taylor Wimpey remains optimistic about the interest in buying properties, even though customers are finding it tough to secure affordable mortgages.
The company is still performing well in the capital and has ongoing projects in locations such as Greenwich, Leyton, and Whetstone.
Taylor Wimpey’s Strength and Outlook
Despite the challenges faced in the near term, Taylor Wimpey considers itself a strong, sustainable, and agile business.
It emphasizes its robust balance sheet and excellent landbank, which positions the company well to manage through current challenges while maximizing value in the medium to long term.
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