But can it maintain this level of growth? And should I be adding this business to my portfolio?

The rising Redrow share price

2020 created a challenging operating environment for homebuilders, and Redrow was no exception. With national lockdowns slowing the construction process and house viewings delayed for safety reasons, the company saw a considerable drawback in both revenue and profits.

However, as the business adapted to the new operating environment and lockdown restrictions began easing, its performance has been quite impressive. At least, I think so. Thanks in part to the temporary suspension of stamp study and government support schemes, Redrow’s total sales over the last six months have increased to £1.04bn. That’s about 7% higher than pre-pandemic levels. What’s more, total half-year home completions are back on the rise, with 3,065 houses finished compared to 2,554 in 2020.

Needless to say, these results are fantastic news. With £1.3bn in the order book, I believe that the impact of Covid-19 has finally worn off. And the management team appears to agree, given that it recently reinstated shareholder dividends. So, seeing the Redrow share price climbing these past few months is quite understandable.

Risks to consider

For the moment, house prices are rising thanks to increased demand, especially for properties that have a garden or large open outdoor areas. However, a lot of this growth stems from the favourable buying environment created by those government support programmes that are slowly being removed.

The suspension of stamp duty has already been lifted, while new restrictions were added to the Help-to-Buy scheme that’s scheduled to end in March 2023. The latter is of particular importance as it has substantially improved the affordability of properties. Once this scheme ends, the benefits end with it, and house prices may subsequently fall.

Another risk factor is interest rates. At the moment, they’re at record low levels of 0.1%. This has made mortgage loans far more accessible to low-income consumers. But I think it’s highly likely that rates will once again increase as the economy recovers from the pandemic. Consequently, interest payments on variable-rate mortgages will rise and could lead to a substantial slowdown in house sales as well as values.

The bottom line

Despite Redrow showing some impressive performance, the share price is still trading below its pre-pandemic levels. I believe it’s capable of recovering in 2021, assuming it can maintain its current growth.

However, like other homebuilders, the company appears to be heavily dependent on government support schemes to drive sales. Given that these are ending in the near future, I’d rather wait and see how the firm performs without this assistance. Therefore I won’t be adding any shares to my portfolio today.

The post Will the Redrow share price recover in 2021? appeared first on The Motley Fool UK.

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Zaven Boyrazian does not own shares in Redrow. The Motley Fool UK has recommended Redrow. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Insist on better rates

Such derisory interest rates don’t keep up with the annual rate of inflation. You are almost certainly guaranteed to lose some of the spending power of your money at those low rates. Instead of increasing your wealth by saving, you would be reducing it if you use a cash ISA with a low interest rate.

There are better rates of interest available on cash savings accounts but they are not ISAs and the interest paid is subject to normal income tax rules, so some of it could be deducted to pay tax. If you are happy to tie up your money for a period of time, you could save it in Paragon Bank’s five-year bond account, for example, and get 2.5% AER. Another example is RCI Bank UK’s 2.36% if you commit to not touching your money for three years.

Those rates are better, but some of the banks and building societies offer Regular Savings Accounts and they pay the highest of all bank interest rates. Generally, you have to be an existing customer of the bank to open a Regular Savings Account and the amount you can pay in each month is limited. Examples include Nationwide, First Direct, HSBC and M&S Bank, which are all paying 5% AER on their Regular Savings Accounts for existing customers.

There’s nothing quite like these ISAs

You can get an even better return if you pay into a Help-to-Buy ISA or into a Lifetime ISA. There are rules regarding your age and what you can spend the money on when you eventually draw it out, but if you meet the criteria, the government will top up whatever you put in with an extra 25% of cash. On top of that, Help-to-Buy ISA providers also pay interest on the money you save, such as Barclays at 2.58% AER and Nationwide at 2.5%. So, the government pays you 25% once and then the ISA provider pays 2.58% or so every year on your money, on the money the government added to your account and on the interest from previous years. Help-to-Buy ISAs and Lifetime ISA are a ‘must’ in my view – it’s free money. Grab it while you can!

But the saving limit on Help-to-Buy ISAs will not take up your entire £20,000 annual ISA allowance, so I’d invest the rest in a share-based investment held within the ISA. You could invest in a low-cost, passive index tracker, a managed fund or pick shares yourself, perhaps guided by a share-picking service such as Share Adviser or Pro here at The Motley Fool.

The post The top cash ISA could be the biggest investing misstep you can make in 2019 appeared first on The Motley Fool UK.

More reading

• A £20,000 ISA invested in red-hot BP and Shell shares 1 year ago is now worth…
• 3 FTSE 100 shares I think look undervalued heading into May
• As the Lloyds share price falls while profits rise, is it time to dump?
• Might it make sense to ‘go away’ from the stock market in May?
• Up 1,000% in 5 years, but the UK government could send Rolls-Royce shares even higher

The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.