Housebuilders tank on stock market with investors ‘nervous’ about mortgage rates

view original post

Monday 20 June 2022 3:31 pm

Housebuilders lead the London Stock Exchange’s top fallers today, after the latest house price data cautioned the tightening of purse strings amid a cost of living crisis.

Barratt Developments and Berkeley Group led the descent, falling a little over four per cent each. While Persimmon dove 3.7 per cent, Ashtead slipped 2.8 per cent and Taylor Wimpey tumbled 2.5 per cent.

The dip into the red comes off the back of property site Rightmove’s House Price Index, published this morning, which added an extra voice to the choir of onlookers expecting record house prices to begin to slow, as moving house falls on the list of financial priorities for Brits.

Just last week, fellow FTSE housebuilders Bellway and Crest Nicholson saw their shares rise in response to scaling house prices, which bosses said led to upbeat trading updates on Tuesday.

And while the average cost of a home is continuing to rise, to a current figure of £368,614 – breaking another for the fifth month in a row – buyer demand fell eight per cent in May, in comparison with April, according to Rightmove.

However, changes to the Bank of England’s stress tests for mortgages also has investors “nervous about the future path of mortgage rates,” Anthony Codling, CEO of property site Twindig and former Jefferies director, told City A.M.

From the beginning of August, the BoE will be withdrawing its mortgage affordability stress tests, which Codling said weighed heavily on the sell-off.

“Some investors are concerned about what happens as mortgage rates rise without the sanity check of the affordability stress tests,” added Codling, who lent assurance that the Financial Conduct Authority’s mortgage rules ensure affordability assessments remain in place.