Surprise rise in interest rates fails to deter house buyers at Persimmon

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The shock rise in interest rates this month has not affected consumers' confidence in the housing market, according to Persimmon, the UK's biggest housebuilder.

The company said visitor levels at its sites were up 10 per cent over the past three weeks compared with August last year. This month is traditionally a quiet one for the industry but Persimmon said it sales were running at a rate of 0.7 houses per site per week, which it regarded as a healthy rate for any time of year.

Further rate rises are expected this year as the Bank of England tries to keep a lid on inflation.

Reporting interim results yesterday, John White, Persimmon's executive chairman, was unfazed. He said there had been no increase in the level of cancellations of sales reservations since the interest rate rise, which would be a sign of nervousness. Levels of cancellations - possible before a binding sales contract is signed - were running at a "quite encouraging" 20 per cent.

"The market is absolutely fine. In the absence of any major disruption, I'm confident that we now have a stable market for the next year, or two or three," Mr White said.

Persimmon will open about 120 sales sites over the next three months. The company predicted house price inflation running at 3 to 4 per cent looking forward. In the six months to the end of June, the company's average selling price increased by 3 per cent to £188,427.

Unlike many of its rivals, Persimmon does not target buy-to-let investors, who typically operate at the frothier end of the market.

Mr White said: "Most of what we sell goes to owner-occupiers, who buy when their circumstances change, like when the family expands or they get a new job. I would only become concerned [about interest rates] if businesses were suffering or job security became an issue."

Persimmon reported a 16 per cent jump in pre-tax profits to £271.5m for the first half of the year. Home completions grew by 39 per cent to 8,226 units, on the back of its recent acquisition of Westbury.

However, margins have come under pressure as a result of the low margins at Westbury and Persimmon having to offer greater incentives in the difficult market late last year. Group operating margins fell from 23 per cent to 19.9 per cent.