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Bellway puts spotlight on rate-cut need
Hugo Duncan, Evening Standard6 Dec 2007
A leading housebuilder today urged the Bank of England to slash interest rates after tumbling sales of new homes threatened profits.
Bellway laid bare the problems facing the housing market when it revealed that reservations between August and November were 7% lower than in the same four months last year.
It said demand for new homes has fallen as a result of "a lack of consumer confidence and the economy generally", and warned profits will now depend on how it fares during the spring.
Chief executive John Watson called for a string of rate cuts to reignite the faltering housing market.
"A cut would be useful to rebuild sentiment," he said. "But a quarter-point cut will not make the market do an about-turn. It has to lead to further interest rate cuts. If that happens, people will start to think that they can afford to a buy a house again."
The call came as the Bank faced its toughest decision for years on interest rates. It has raised them five times to 5.75% since August last year to rein in inflation and keep the booming economy under control. However, the credit crunch threatens to turn the slowdown in the economy into a full-blown slump, piling pressure on the monetary policy committee to start cutting rates.
The pound tanked against currencies around the world yesterday as hopes of a rate cut soared. It was down 0.3 of a cent to $2.023 today.
Consumer confidence has been shattered by the credit crunch and troubles at Northern Rock while the housing market is facing its biggest crisis for more than decade.
The Halifax, Britain's biggest mortgage lender, yesterday said house prices fell 1.1% in November. It followed drops in September and October, and marked the first time since 1995 prices have fallen three months in a row. The average home is now worth £5000 less than in August.
Figures yesterday also showed that service-sector conditions weakened last month to the worst since the Iraq war began in 2003. The CBI today added to the gloom, saying demand for services has slowed in the last three months.
