Demand for new houses plunges following Truss’s mini-budget

DEMAND for new houses fell sharply in the wake of the mini-budget as wouldbe buyers adjust to a world of permanently higher interest rates, one of Britain’s top developers has said.

Jason Honeyman, the chief executive of the house builder Bellway, said that market turmoil following the botched tax cuts had delivered a “shock to the system” and sent new home reservations at his company tumbling by 40pc in the following three weeks.

It came as three of Britain’s biggest mortgage lenders increased interest rates a day after Jeremy Hunt ripped up the mini-budget in an effort to calm markets.

Mr Honeyman said: “There is still a mortgage market and lenders have been very responsible, but they’ve repriced their products in line with higher interest rates and most customers are now adopting a ‘wait and see’ approach.”

TSB, Barclays and Natwest all increased the price of fixed-rate deals yesterday, with the former putting up costs by almost a full percentage point.

The banks’ latest increases were announced despite Mr Hunt, the new Chancellor, abandoning almost all of his predecessor Kwasi Kwarteng’s tax cuts in a bid to calm bond markets.

It was hoped that lower borrowing costs in the wake of the U-turn would feed into lenders’ pricing, but the banks proceeded with rate increases for fixedrate deals this morning anyway.

Bellway does not expect the situation to change until after Christmas, Mr Honeyman said. The company will take a more cautious approach to buying new land in the coming year and expects its average selling price to drop 4.6pc to £300,000, partly because it is building more social housing.

Mr Honeyman said: “I think everyone has to get used to the fact that the era of low interest rates of one or two per cent is over. It almost needs a reset button.”

The mortgage rate increases announced on Tuesday were all signed off by executives before Mr Hunt’s U-turn a day earlier. A TSB spokesman said: “We keep our products under regular review to respond to market conditions and to ensure that we continue to deliver great service for our customers.”

A Barclays spokesman said the lender continually assessed its pricing and took into account “customer demand and external market conditions”.

Natwest declined to comment.