Barratt: FTSE 100 developer will bank on mortgage cuts for sales lift
Barratt Developments will update investors on its half-year trading performance this Wednesday, with hopes that cooling mortgage rates will boost its balance sheet.
Shares at the FTSE 100 developer are trading higher than a year ago and up by a third from their autumn nadir, despite flagging multiple times that a slowdown in house purchasing was eating its bottom line.
Barratt has also trimmed its full-year dividend to 33.7p from 36.9p a share in fiscal 2023 and brought its share buyback programmes to a close.
Before Christmas, chief David Thomas said the outlook for the year remained “uncertain” blaming high mortgage rates for a slide in the number of homes it built over in the three months to October.
Since then, mortgage rates have gradually declined but remain around three per cent higher than its December 2021 average of 2.34 per cent.
“News flow from the building sector has been mixed, as solid updates from Vistry and Persimmon have contrasted with disappointing ones from MJ Gleeson and Crest Nicholson, Russ Mould, investment director at AJ Bell, said.
“But shares in all eight FTSE 100 and FTSE 250 builders remain nicely up from their 2023 lows,” he said.
Mould said this lift is due to investors pinning their hopes on an interest rate cut from the Bank of England.
“Sticky inflation means that the first-rate cut is now expected in May, not March, but the market is still looking for the potential boost to housing demand that could come from lower borrowing costs,” he added.
Improvements in housing affordability will also hopefully play in Barratt’s favour.
Property prices fell by -0.8 per cent compared to the previous year in January, according to the latest reading from Zoopla.
New sales are also 13 per cent higher than a year ago and up across all countries and regions.