PHOTO
Britain's homebuilders index hit a more than 11-year low on Monday on concerns that a weaker pound could lead to more rate hikes by the Bank of England, potentially hurting house prices and demand.
The pound plunged to a record low against the dollar early on Monday and British bonds were slammed on concerns over the government's fiscal plan, unleashing calls for the Bank of England to deliver an immediate rate hike to restore investor confidence.
"(It's) more to do with massive rate hikes killing the sector," Markets.com analyst Neil Wilson said.
The housebuilders index fell 6% to hit its lowest level since March 2013.
"The weak pound is driving expectations for further rate increases, which means lower house prices," Peel Hunt analyst Sam Cullen said.
Taylor Wimpey, Persimmon, Berkeley Group and Barratt fell between 5.0% and 7.5% by 10:41 GMT, pushing them to the bottom of the FTSE 100.
Shares of Taylor Wimpey hit their lowest since 2014, Persimmon since 2016, and Barratt and Berkeley stocks since March 2020.
UK homebuilders, whose shares saw their worst times ever during the 2008-09 global financial crisis, have seen government support come and go over the last few years and have had to contend with several setbacks including Brexit uncertainties and more recently a $5 billion bill, to remove dangerous cladding from buildings following a deadly 2017 London fire.
They got a boost last week after new British Finance Minister Kwasi Kwarteng said stamp duty, a tax on house purchases, would be cut.
However, there have been signs of cooling in the housing market and fears remain of an impending downturn in the sector, as a worsening cost-of-living crisis and a steep climb in mortgage rates cast a cloud over demand.
Taylor Wimpey last month flagged a softer sales rate for July, fanning those concerns. (Reporting by Yadarisa Shabong in Bengaluru; Editing by Anil D'Silva and Shounak Dasgupta)