Barratt slashes dividend amid housing market slump as mortgage rates soar
Britain’s largest housebuilder has reported a significant decline in profits as soaring interest rates continue to dampen demand.
Barratt Developments announced that adjusted profits before tax fell by 16.2% to £884.3 million in the 12 months leading up to June, compared to over £1 billion the previous year.
The number of homes built and sold dropped by 702 to 17,206.
Barratt also revealed its decision to reduce the final dividend to 23.5p from 25.7p last year and halt share buybacks. However, the company stated that it maintains a net cash of £1.06 billion on its balance sheet.
Slump: Barratt Developments said profits tumbled 16.2% to £884.3m in the 12 months to the end of June, having topped £1bn the previous year
Like its competitors, Barratt has been negatively impacted by the 14 consecutive interest rate hikes that have reduced demand due to increased mortgage rates.
Interest rates have risen from 0.1% to 5.25% since December 2021, causing hardship for borrowers. Another rate hike is expected this month.
However, Bank of England Governor Andrew Bailey recently stated that rates are nearing their peak.
In addition to rising borrowing costs, Barratt has also experienced a surge in business expenses due to inflation.
CEO David Thomas expressed concerns about Britain’s “ineffective planning system” hindering development.
Despite the challenges, revenues increased by 1% to £5.32 billion last year, with the average price of a Barratt home rising by 7.9% to £367,600.
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