Saturday, 21 April 2007

Home builders already complaining about future rate hike.

It like a child screaming before the dentist has applied the injection. Low-cost UK home builder - Bellway - is already writhing in agony before the Bank of England has applied the medicine. After posting a 15 percent rise in profits, it is already complaining about an interest rate increase that hasn't yet happened.

As the company says "another rate rise would slow profit growth". Perhaps the Bellway management need to employ an economist. The point of the interest rate is to slow down growth, because the economy has reached full capacity. Further growth means more inflation, and inflation is bad because it robs the poor, the saver and those on fixed incomes. Inflation benefits the borrower and the rich (who can diversify their assets more easily and avoid inflation).

Low-cost home builder Bellway said on Tuesday another interest rate rise would slow profit growth in the country's strong housing market, as the company posted a 15 percent rise in interim profit with record forward order books.

Bellway, which builds around two-thirds of its homes on brownfield or former industrial sites, also plans to consider acquisitions as its rivals consolidate to drive down costs and boost land bank.

"Another interest rate rise would make it difficult for the buyer...but I don't think it will make the market go into reverse, I think it's something that has got to happen...We are more than happy for it to slow down, as long as it slows gently," Chief Executive John Watson told Reuters in an interview.

1 comment:

Anonymous said...

Building companies will be complaining a lot more in six months time.

Pain, pain and no gain.....