Written by Yadarissa Chabong
(Reuters) – Britain’s homebuilders’ index hit its lowest level in more than 11 years on Monday on concerns that a weaker pound could lead to further interest rate hikes by the Bank of England, which could hurt home prices and demand.
Sterling fell to a record low against the dollar early on Monday and British bonds came under fire over concerns about the government’s fiscal plan, unleashing calls for the Bank of England to raise interest rates immediately to restore investor confidence.
“(It) is more about the massive interest rate hike that is killing the sector,” said Markets.com analyst Neil Wilson.
The home-building index fell 6% to its lowest level since March 2013.
“The pound is driving expectations of further interest rate increases, which means lower house prices,” said Sam Cullen, analyst at Bill Hunt.
Taylor Wimpy (LON :), persimmon (LON :), Berkeley Group (OTC :), and Barratt were down between 5.0% and 7.5% by 10:41 GMT, sending them lower.
Taylor Wimpey shares have hit their lowest levels since 2014, persimmons since 2016, and Barratt and Berkeley shares since March 2020.
UK homebuilders, whose stocks had their worst time ever during the 2008-2009 global financial crisis, have seen government support come and go over the past few years and have had to contend with several setbacks including uncertainty over Brexit and more recently the bill. $5 billion, to remove hazardous cladding from buildings after the 2017 deadly London fire.
They got a boost last week after Britain’s new chancellor Kwasi Quarting said stamp duty, a tax on home purchases, would be reduced.
However, there were signs of a slowdown in the housing market and fears of an impending recession in the sector remain, as the worsening cost-of-living crisis and sharp rise in mortgage rates cloud demand.
Taylor Wimpey last month announced a drop in sales for July, adding to those concerns.