Taylor Wimpey warns on profits as interest rates hit demand, shares fall

(Sharecast News) - Shares in Taylor Wimpey fell on Wednesday after the housebuilder warned full-year adjusted operating profit would be at the bottom end of consensus due to weak demand as a softer autumn selling season and higher interest rates reduced mortgage affordability for buyers.

The company guided for around 10,500 UK completions this year, below its previous forecast of 10,600 to 10,800 homes and said year-end net cash is still expected to be about £250m.

Analysts are forecasting earnings of £262m-£299m, according to a company compiled consensus.

"The autumn selling season has been more subdued, as higher mortgage rates and living costs continue to reduce customer affordability," said chief executive Jennie Daly.

Higher borrowing costs continued to weigh on the UK housing market after the Bank of England raised its base rate to 4% from 3.75%, with governor Andrew Bailey warning that further tightening may be required depending on the impact of Middle East tensions and energy prices on inflation.

Against that backdrop, Taylor Wimpey said it had increased buyer incentives, including deposit top-ups and one-off mortgage contributions, while average selling prices fell 2.5% year-on-year as the housebuilder sought to support demand.

The company also reiterated its readiness to participate in the government's forthcoming Your First Home scheme for first-time buyers. However, with the initiative not due to launch until April, analysts cautioned that housing market activity could remain subdued in the coming months.

Reporting by Frank Prenesti for Sharecast.com