Taylor Wimpey profits hit by mortgage famine

Taylor Wimpey, the UK's biggest housebuilder, added to the gloom descending over the nation's housing market yesterday after it revealed falling profits and gave a pessimistic outlook for the rest of the year.

Blaming "weakened" market conditions, the company warned that profits would now come in nearthe bottom of previousforecasts.

The company, which last month announced its first loss in 15 years, said the slowdown was most acute for first-time buyers, and has been exacerbated by a worsening mortgage famine as cash-strapped banks pull most of their most favourable offers from the market.

It said: "Sales rates remain significantly below those of the equivalent period of 2007 on a pro forma basis, with higher levels of cancellations being experienced."

The company's order book is worth 26 per cent less than it was a year ago, which is worse than the 20 per cent the company said it had fallen just last month.

Born in the heady final days of the housing market boom last year with the £5.5bn merger of Taylor Woodrow and George Wimpey, the company has lost more than half of its value since last summer. After yesterday's close, it was worth just £1.67bn.

Its heavy exposure to America also continues to weigh on the group. After taking heavy writedowns on its US business last year as the US housing crisis gained momentum, the company said it expects the market to remain moribund for the remainder of the year.

Those looking for a silver lining could extract some cheer from its indication that America does not seem to be getting worse, but will more likely bump along the bottom for the foreseeable future. It said: "We do not expect market conditions in the US to improve significantly during the remainder of 2008. In the short term, our strategy remains to focus on managing our existing sites and reducing the cost base."

Taylor Wimpey's worsening straits will increase the urgency for the Government to enact a plan it is working on that would see the Treasury exchange banks' mortgage-backed assets for government bonds, which can easily be turned into cash. The proposal would be the most extreme measure yet taken by the Government to ameliorate the mortgage famine.