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LSL Property Services, one of the UK’s largest providers of mortgage and valuation services, has warned its full-year profits are likely to be “substantially lower” than previously forecast due to the impact of rising interest rates on the housing market.
The company, which owns mortgage adviser network Primis and estate agency Your Move, posted revenue of £104mn for the first half of the year, down from £160.9mn in the same period last year. Underlying operating profit fell to £3.5mn from £14.2mn, broadly in line with its expectations.
Shares were down 13 per cent on Monday morning following the pre-close trading update.
LSL said it had been affected by “significant changes in the mortgage market”, driven by consecutive increases to interest rates. House-buying activity has become more subdued in recent months as the Bank of England ratcheted up its monetary tightening campaign, lifting the base rate to 5.25 per cent last Thursday and reducing the affordability of mortgages for prospective buyers.
LSL predicted that lower levels of purchasing and remortgaging activity in the second half of the year would “significantly impact” its surveying and financial services businesses and lead to a “wider range of possible outcomes for the group than usual”. The company said it expected an improvement in second-half group profits compared with the first six month of the year.
Data from UK lender Nationwide last week showed there were 86,000 house sales in June, 15 per cent lower than at the same time last year and about 10 per cent below pre-pandemic levels.
On Monday, Halifax’s own house price index showed UK property prices were 2.4 per cent lower in July than in the same month the previous year, due to tougher conditions across the market.
LSL said it had previously expected the fall in mortgage activity to “moderate” in the second half, “with improved consumer sentiment and more stable lending conditions”. But it added: “However, the larger than expected increase in the Bank of England base rate announced in June has had a material impact on the mortgage market.”