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Bellway has said that recent rises to mortgage rates as a result of the Iran war are dampening demand for housing, on top of rising building cost inflation due to the conflict.
The FTSE 250 housebuilder said it has seen a “moderation” in customer demand in April and May, bringing an end to a “positive” run at the start of spring.
A number of leading housebuilders and construction firms have warned in recent months that building cost inflation – and falling demand for housing – is hitting their performance.
Bellway saw private house reservations fall by 6.2 per cent year on year to an average of 151 per week in the four months since February.
The group said it traded from an average of 233 outlets in this period, down four per cent from 242 year on year, but remains on track to open 40 new sites in the second half of this year.
‘Mortgage mayhem’ hits consumer demand
“Trading in the early part of the spring selling season showed a marked improvement compared to autumn 2025, however we have seen a moderation in customer demand in April and May in response to the recent rise in mortgage rates,” the firm said.
The “mortgage mayhem” which followed February’s outbreak of war in the Middle East saw five-year mortgage rates soar above 5.5 for the first time since September 2024.
While average rates have since eased to around 4.35 per cent they remain inflated compared to before the Iran war.
Housing experts have said prospective home buyers may be deterred from the market by the prospect of a Bank of England interest rate hike.
Construction firms and housing companies have also warned in recent months that the Iran war is spiking the cost of building materials.
“There is renewed upward pressure on building material costs stemming from higher fuel and energy input costs, and we are seeing increased prices and the introduction of surcharges by certain supply chain partners,” Bellway said on Tuesday.
‘Prolonged’ hit to demand likely
But Bellway said it expects to meet its targets for the year, which are to build between 9,300 and 9,500 homes and produce a pre-tax profit of between £320m and £330m.
The firm said it is maintaining its “disciplined and highly selective” approach to land buying, with the value of its new land contracts having fallen 27 per cent year on year to £363m in the year to August.
Bellway said: “Our industry continues to face challenging headwinds, increasing the risk of a more prolonged period of softer customer demand alongside renewed inflationary pressure on build costs.”
In April, rival housebuilder Berkeley saw its shares plummet after it “pulled up the drawbridge” by halting land buying altogether in the face of an “unprecedented increase in cost and regulation”.