LSL Property Services warns of gains as rising interest rates hit home buying
LSL Property Services warns of gains as rising interest rates hit home buying
- LSL expects fewer mortgage loans and remortgages than previously forecast
- The valuation instructions from lenders have plummeted by about 40% in recent weeks
- Turnover in the first half would have fallen from £160.9m to £104m
LSL Property Services has warned that annual profits will be significantly lower than previously forecast as rising interest rates will hit mortgage lending and home buying.
The group, which owns brokers Your Move and Reeds Rains as well as mortgage adviser Primis, said the Bank of England’s ‘larger-than-expected rate hike’ in June had a ‘material impact on the mortgage market’.
LSL expects sales to fall to around £104m in the six months to the end of June from £160.9m in the previous year, with underlying operating profit falling from £14.2m to £3.5m million.
LSL, which provides advisory services to mortgage brokers, said it expects lower levels of mortgage lending and overmortgaging than previously forecast for the remainder of the year
The Newcastle-based company, which also provides advisory services to mortgage brokers, said it expects lower levels of mortgage lending and overmortgaging than previously forecast for the remainder of the year.
This change in the mortgage market will further affect the surveying division as more borrowers stay with their existing lenders meaning there is no need for property appraisal services.
While lenders’ valuation instructions had built steadily in the first half, they fell about 40 percent in recent weeks to “levels significantly below historical norms,” LSL told shareholders.
Chief executive, David Stewart, said: ‘Market conditions have been challenging and have become more difficult recently, impacting this year’s financial performance.’
In the first half of the year, mortgages fell 27 percent, while remortgages fell 15 percent, though both declines were less acute than the market as a whole.
“While this change in the nature and volume of mortgage lending was largely factored into our expectations for H1, the most recent trade following the interest rate hike in June indicates that this shift has further deepened and we now expect these conditions to continue in H2 , with a resulting impact on full-year margins and earnings,” LSL told shareholders.
The profit warning sent LSL Property Services shares fell as much as 14 percent on Monday morning before recovering some losses to trade 11 percent to 250 pence.
The housing market is in the middle of a slowdown as high mortgage payments and tight credit conditions hurt demand.
The Bank of England raised interest rates by 0.25 percentage point to 5.25 percent last week in a bid to lower inflation.
The decision marks the bank’s 14th base rate hike since December 2021. The base rate is now at its highest level since February 2008, when it also stood at 5.25 percent.
Home prices fell for the fourth consecutive month, according to mortgage lender Halifax.
However, the lender also said the market showed resilience and industry data showed increased activity.