LSL Property Services Warns of Gains as Rising Interest Rates Hit Home Buying
- LSL expects lower home loans and remortgages than previously anticipated
- Valuation instructions from lenders have fallen by around 40% in recent weeks.
- First half revenue is forecast to have fallen to £104m, from £160.9m
LSL Property Services has warned that annual earnings will be substantially lower than previously anticipated as rising interest rates will hit home lending and home buying.
The group, which owns estate agents Your Move and Reeds Rains as well as mortgage adviser Primis, said the Bank of England’s “larger-than-expected interest rate increase” in June had a “material impact on the mortgage market.
LSL expects revenue in the six months to the end of June to have fallen to around £104m, from £160.9m a year earlier, with underlying operating profit falling to £3.5m, from £ 14.2 million.
LSL, which provides advisory services to mortgage brokers, said it expected lower levels of home loans and remortgages than previously forecast for the rest of the year.
The Newcastle-based company, which also provides advisory services to mortgage brokers, said it expected lower levels of home loans and remortgages than previously forecast for the rest of the year.
This shift in the mortgage market will have a bigger impact on its surveying division, as more borrowers stay with their existing lenders, meaning they don’t need property valuation services.
While valuation instructions from lenders had been piling up steadily in the first half, they have fallen about 40 percent in recent weeks to “levels substantially below historical norms,” LSL told shareholders.
Chief Executive David Stewart said: “Market conditions have been challenging and more recently they have become more difficult, which has affected financial performance this year.”
In the first half, home loans fell 27 percent, while remortgages fell 15 percent, though both declines were less sharp than those seen across the market.
“While this change in the nature and volume of mortgage lending was largely factored into our expectations for the first half, the most recent trading following the June interest rate increase indicates that this change has increased further. and we now expect these conditions to persist into the second half, with a resulting impact on full-year margins and earnings,” LSL told shareholders.
The profit warning sent LSL Property Services Shares falling as much as 14 per cent on Monday morning, before recovering some losses to trade 11 per cent at 250 pence.
The housing market is in the midst of a slowdown, as high mortgage costs and tight credit conditions reduce demand.
The Bank of England raised interest rates by 0.25 percentage point to 5.25 percent last week in a bid to reduce inflation.
The decision marks the bank’s 14th base rate increase since December 2021. The base rate is now at its highest level since February 2008, when it also stood at 5.25 percent.
House prices have fallen for the fourth straight month, according to the Halifax mortgage lender.
However, the lender also said the market was showing resilience with industry data showing increased activity.
