Homebuilders under pressure after Bank of England announces plans to cool down house market
Persimmon, Britain’s largest builder by market value, plunges to the bottom of the FTSE 100 index
Thursday 28 November 2013
The Bank of England’s stunning move to clamp down on rising house prices sent shockwaves through the City’s listed housebuilders today, wiping more than one billion pounds off the sector as panicking investors dumped the shares.
Governor Mark Carney’s comments over “evolving risks” and a package of measures to rein in mortgage lending, including changes to its Funding for Lending scheme and potentially more stringent affordability criteria for borrowers, sent traders running for cover.
Persimmon, Britain’s largest builder by market value, immediately plunged to the bottom of the FTSE 100 index, shedding 7 per cent, or 44p, to 1201.5p.
Barratt Developments took an even bigger hammering, losing 33.2p to 314.5p, a fall of more than 9 per cent. The carnage continued as Berkeley Group dropped 106p to 2325p, or 4per cent.
Bellway, Taylor Wimpey, Redrow and Bovis Homes were among the FTSE 250’s biggest fallers, as well as estate agent Savills. Countrywide lost 1 per cent, and in the FTSE 100 builders merchant Travis Perkins was among the biggest divers, off more than 2 per cent.
Carney said: “We did not see an immediate threat coming from the housing market but we are concerned about the prospective evolution of the housing market. The concern is where this could go. We definitely see some short-term momentum.”
The Bank’s intervention comes after a succession of floats for housebuilders and estate agents since the turn of the year, driven by easing credit conditions brought about by the FLS, which has offered cheap funding conditions for banks. Carney wrote to Chancellor George Osborne reporting “significant improvements in household credit conditions” as he set out the changes “although lending to businesses overall remains muted”.
He added: “These positive changes in general economic conditions have been accompanied by a strengthening of the housing market. Although the growth in household loan volumes remains modest, activity is picking up and house price inflation appears to be gaining momentum.”
Osborne replied: “Although loan levels remain below pre-crisis levels, there are signs that the UK housing market has started to normalise. Mortgage rates are at their lowest in five years and mortgage products for lower loan-to-value mortgages are widely available.
“This reflects, in part, the success that the FLS has had on household credit conditions, and we have agreed it is an appropriate time to begin withdrawing this broad support for household credit conditions.”
- 1 British tourists 'murdered' in Thailand: Pair's bloodied bodies found naked on Koh Tao beach
- 2 Vivienne Westwood says 'Yes' to Scottish Independence by declaring: 'I hate England'
- 3 Welcome to Cameroon, where drinking Baileys can lead to imprisonment
- 4 Lego breaks out of the toy box and heads for the gallery
- 5 Vogue under fire for 'Big Booty' article
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
Salmond accused of laughing off national debt with ‘what are they going to do: invade?’ joke
iJobs Money & Business
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...