Persimmon Plc is offering new buyers a mortgage holiday in an attempt to boost demand for its homes after higher rates hurt sales.
(Bloomberg) — Persimmon Plc is offering new buyers a mortgage holiday in an attempt to boost demand for its homes after higher rates hurt sales.
The UK homebuilder says its new “10 months mortgage free” customer offer has generated strong interest in its first week, according to a statement Thursday. It’s too early to say if it will translate into sales, Persimmon added.
Britain’s housing market is facing disruption as it adapts to high borrowing costs and the threat of a house price plunge. Over 800,000 households will see their mortgage rates more than double in 2023 as they come off fixed-rate deals, which is driving predictions of a 10% drop in values this year.
“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,” Chief Executive Officer Dean Finch said in the statement. “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.”
Persimmon saw weekly private net sales fall to 0.3 in the fourth quarter of the year, compared with 0.77 in the same period a year earlier, according to the statement. That’s as the firm’s forward sales position reduced year-on-year to £1 billion ($1.2 billion), compared with £1.6 billion in 2021.
The homebuilder also said it had renegotiated or paused the start of around 30 sites in response to uncertainty in the housing market. The company will take a “highly selective approach” to any new land purchases this year, Persimmon said in the statement. It will only invest where it sees the “very best opportunities,” the company added.
“A housebuilder’s activity in the land market is always a good indicator of market conditions,” said Anthony Codling, a former Jefferies housing analyst who now runs property website Twindig. “Today’s trading statement is the first time in a long time that Persimmon’s glass has looked half empty rather than half full.”
Still, Persimmon rose as much as 3% in early London trading.
(Updates with details on land purchases in the sixth paragraph, an analyst comment in seventh paragraph and the share price move in the last paragraph.)
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