UK's Barratt warns of weak housing market on rising mortgage rates

By Aby Jose Koilparambil

(Reuters) -Britain's largest housebuilder Barratt Developments Plc on Wednesday said it would build fewer homes in its current fiscal year than last as higher mortgage rates and inflation drive homebuyers away, sending its shares lower.

The UK housing market has slowed in recent months, hit by a sharp rise in mortgage rates and reduced availability of loans, while expectations of further rate hikes this year and uncertainties about the extent of impact of raging inflation on households have added further pressure on the sector.

If market weakness persists through to the traditionally strong spring season, Barratt and its joint ventures expect to build a total of 16,000-16,500 in the 12 months to June 30, down from 17,908 units in the same period a year earlier, it said.

Barratt in September said it was targetting 3-5% output growth in the medium term.

The FTSE 100 firm, which in October had warned on profit in the wake of weakening demand, said its order book - a key measure in gauging sales performance in the short-term - stood at 2.54 billion pounds ($3.09 billion) as of Dec. 31, compared with 3.79 billion pounds a year earlier.

Barratt stock dropped more than 3% to 410.2 pence in early trade, dragging shares of its FTSE 100 peers Persimmon and Taylor Wimpey lower.

The group, which in September announced a $229 million share buyback, said it intended to restart the programme after it releases results for the six months to Dec. 31 - the first half of its fiscal year - on Feb. 8.

"We believe Barratt's strong land bank and 965 million pounds net cash position offers flexibility to adapt to near-term challenging market conditions, sustain an attractive dividend, buy-back shares and grow long-term," Credit Suisse analysts said in a note.

Barratt said its net bookings rate per average week fell to 0.30 during Oct.10-Dec.31 period, compared with 0.69 during the corresponding period a year earlier, while its sales rate dropped to 0.44 homes per active outlet per week from 0.79 a year ago.

It also appointed Caroline Silver as chair designate from June 1, succeeding John Allan as non-executive chair on Sept. 6. ($1 = 0.8220 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Rashmi Aich and Conor Humphries)