Winkworth shares fell 14% yesterday morning after the estate agency chain issued a profit warning due to increasing interest rates and a fresh slump in mortgage approvals.

The company, which later saw its share price recover to close the day down 2% at 1.42p, said the sales market proved more challenging in the second quarter of the year, as rate hikes deterred would-be buyers.

The Bank of England’s decision to increase interest rates for the 13th consecutive time last month sent mortgage lenders into a frenzy.

The average cost of a two-year fixed rate mortgage is currently at a 15-year high, forcing many prospective buyers to revaluate how much they can afford to borrow to buy a home.

Winkworth, which has over 90 branches across the UK, said a combination of high rates and poor consumer confidence will lead its H1 pre-tax profits to be below last year’s level, adding that the outlook for sales in the second leg of the year remains “uncertain”.

Its preliminary half year figures indicate an overall fall of 6%, with lettings revenue approximately 11% higher and sales revenues down by 20% compared with H1 2022.

As a result, the directors expect H1 2023 pre-tax profits to be below last year’s level. While the Directors believe that confidence will return once buyers can access a broader choice of mortgage finance, the outlook for sales in the second half of the year remains uncertain and the shortfall in H1 2023 means that full year pre-tax profits are likely to fall below market expectations.

The firm’s balance sheet remains strong and debt free, with cash in line with the level reported at 30 June 2022 despite continued investment in the business.