Redrow shares dip on 10% sales fall forecast

REDROW has become the latest casualty of the ailing housing market, the housebuilder saying its fears that 2008 would prove to be a "tough trading market" had been realised.

The firm, which has a sizeable regional arm in Scotland, said sales activity and selling prices had "come under increased pressure" as a result of market conditions, and added that it expected legal completions in the current financial year to be 10 per cent lower than estimates made in February.

Shares in the Wales-based company slumped on the news, closing 22.25p, or 7.6 per cent, lower at 270.5p.

The firm, which is headed by chief executive Neil Fitzsimmons, said a tightening in lending criteria had resulted in an increase in cancellations – which it said had experienced a "marked increase" since Easter.

It added: "It is becoming increasingly difficult to predict accurately reservation and cancellation rates."

The group said it planned to deal with the problems by "stringent control of our cost base and effective management of cash flow".

Redrow, which is valued at about £420 million, refused to comment separately on its Scottish operations, saying it would update the market in July.

Broker Numis Securities said the interim management statement was not materially different to that delivered by Taylor Wimpey and Persimmon recently.

But it added: "Redrow remains one of our least-favoured stocks in the sector due to its debt position, low margins and sector average valuation."

Redrow was recently the subject of speculation about a possible £1.3 billion merger with larger rival Bellway.

While Bellway is the larger firm by market value, Redrow is thought to boast a bigger holding of future plots – estimated at around 25,700.

NATIONWIDE CUTS LOAN COSTS

NATIONWIDE has cut the cost of some of its fixed-rate home loans as the battle for market share between the UK's biggest lenders unfolds. The building society, Britain's third-largest lender, said yesterday that cuts of up to 0.3 per cent would apply to some two and five-year fixed rate deals from Friday.

Home buyers with a deposit of 25 per cent or more will benefit most, with a new deal of 5.85 per cent for a five-year fixed rate. Two-year fixed rates will fall to between 5.95 per cent and 6.65 per cent, depending on the fee and whether the loan is for a purchase or remortgage.

The cuts mirror recent moves by lenders including RBS and Abbey in targeting low-risk borrowers with large deposits or significant equity in their property.

"It remains the case that the biggest struggle is not being able to afford a mortgage, it is being able to get one," said Sean Gardner, chief executive of Moneyexpert.com..