UK builders battered as borrowing prices rise: Investors trim bets on Bank of England rate of interest cuts

Shares in British housebuilders tumbled yesterday as investors trimmed bets on Bank of England interest rate cuts in the wake of the Budget.

On a day of turmoil on financial markets amid concerns over Rachel Reeves’s borrowing plans, blue chip developer Persimmon fell 7.5 per cent while Bellway was down 7 per cent and Taylor Wimpey shed 6.7 per cent.

The sell-off came as analysts warned that interest rates would not fall as far or as fast as expected before the Budget. 

Budget jitters: On a day of turmoil on financial markets, blue chip developer Persimmon fell 7.5% while Bellway was down 7% and Taylor Wimpey shed 6.7%.

Investors are now betting on just one more rate cut this year, expected next week.

The borrowing binge announced by the Chancellor in the Budget is expected to put upward pressure on inflation, preventing the Bank from cutting rates too fast.

Her plans have caused ructions on the bond markets and analysts warn the sharp rise in gilt yields will feed through to higher mortgage costs.

Laith Khalaf, head of investment analysis at AJ Bell, said: ‘Based on what’s happened to the two-year gilt, we might start to see mortgages creeping up again, just when borrowers thought we were on a firmly downward path.’

Investment bank Goldman Sachs said, after cutting rates next week, it expected the Bank of England to leave them on hold in the following month, in a blow to millions of borrowers.

Before Rachel Reeves delivered her Budget, markets were pencilling in two cuts this year. 

But traders now see a less than one in three chance that there will be a second reduction in December.