Published 13th Jul 2023, 09:20 BST

The housebuilding giant is forecasting its build completions to tumble by as much as 23 per cent over 2023-24, to between 13,250 and 14,250 in 2023-24.

Prices for private sales in its forward order book have also dropped sharply, down 8.7 per cent at £342,900 on average, partly down to the group's use of incentives to boost demand.

The housing market is being hit by surging mortgage costs, with average two-year fixed mortgage rates jumping to a 15-year high of 6.7 per cent earlier this week as interest rates keep rising to combat stubbornly high inflation.

Derwenthorpe in east York, a mixed housing development built in partnership between the Joseph Rowntree Housing Trust and David Wilson Homes, which is part of Barratt Developments.

Halifax recently said house prices fell at their fastest annual rate in 12 years last month, down 2.6 per cent at £285,932.

Barratt saw demand tail off after last October's mini-budget market chaos sent mortgage rates soaring, before recovering a little in its third quarter, though it said reservations "slowed more than normal seasonal trends" from mid-May to the end of June.

Its weekly net reservations per outlet dropped to 0.55, against 0.88 the year before, while completions slumped 12.8 per cent in the six months to June 30, taking its overall for the year down 3.9 per cent to 17,206.

The group said forward orders have also dropped sharply, at 8,995 homes worth £2.2bn as at June 30, down from 13,579 homes at a value of £3.6bn a year ago.

First-time buyer demand has been impacted the most, it added, plunging 49 per cent year-on-year due to the ending of the Help to Buy scheme and soaring mortgage rates.

The group is set to report profits for the year to June 30 in line with market expectations but said the outlook is gloomier.

"Looking ahead, we recognise that there are significant macro-economic headwinds, most notably persistent inflation and a higher interest rate environment, which will impact UK economic growth, employment and consumer confidence and spending," Barratt said.

Chief executive David Thomas said: "Whilst the trading backdrop has become more challenging in recent months, with many of our customers facing significant cost-of-living pressures, we have responded decisively - increasing our reservations into the private rental sector, using incentives for customers in a disciplined way and flexing our build activity, land-buying and operating costs to reflect market conditions."

Last week, Sheffield-based builder MJ Gleeson said it sold fewer properties in the year to the end of June.

It completed the sale of 1,723 homes in the latest financial year, compared to 2,000 the previous year.

Barratt to build up to 23 per cent fewer homes over year ahead amid slumping demand