HomeFinanceMARKET REPORT: Housebuilders shares plunge over rate rise fears

MARKET REPORT: Housebuilders shares plunge over rate rise fears

Housebuilders were hit by fears an interest rate rise would push up mortgage costs and affect demand for new homes.

Blue chip developers Barratt, Berkeley, Persimmon and Taylor Wimpey all saw their shares drop ahead of the Bank of England rates decision on Thursday.

Shares in Barratt fell 2.9 per cent, or 19.2p, to 643.8p, Berkeley was down 2.3 per cent, or 98p, to 4257p, Persimmon dropped 2 per cent, or 55p, to 2666p and Taylor Wimpey closed off 2.6 per cent, or 3.95p, at 150.6p.

Mortgage costs: Blue chip developers Barratt, Berkeley, Persimmon and Taylor Wimpey all saw their shares drop ahead of the Bank of England rates decision on Thursday

Mortgage costs: Blue chip developers Barratt, Berkeley, Persimmon and Taylor Wimpey all saw their shares drop ahead of the Bank of England rates decision on Thursday

The Bank has been widely tipped to raise rates from 0.1 per cent to 0.25 per cent when the monetary policy committee meets – pushing up the cost of new mortgages.

All the talk of higher borrowing costs has put pressure on builders as even a small hike could dampen the housing market.

Susannah Streeter, an analyst at Hargreaves Lansdown, said: ‘There are worries successive rate rises, however gentle, could dampen down appetite in the red hot housing market, and act as a drag on new home sales.’

With inflation heading towards 4 per cent or even 5 per cent, the Bank is under pressure to act.

Stock Watch – Shoe Zone

Shoe Zone has raised profit guidance after better-than-expected sales.

Shares in the discount shoe retailer soared.

The firm told shareholders yesterday morning that it expects its profits for the past year to surpass pre-pandemic levels. Shoe Zone said its pre-tax profit for the year to October 2 is expected to have been between £9million and £10million.

The firm had previously guided that it would reveal a profit of at least £6.5m.

This is a big improvement on the £14.6million loss it posted for the previous financial year.

Shares closed up 16 per cent, or 14.5p, at 105p.  

The oil price has played its part in pushing inflation higher and crude rose back towards $85 a barrel yesterday – spelling further bad news for motorists. Drivers are now paying 147.94p on average for a litre of diesel and 144.35p for a litre of petrol – an all time high.

In a further headache for the Bank, output growth is slowing at Britain’s factories at the same time as prices are rising, according to the IHS Markit purchasing managers’ index (PMI) for British manufacturing.

As concerns about the strength of the economy continue, some analysts believe the Bank will hold off this week and wait until clearer data becomes available before raising rates. 

Laith Khalaf, head of investment analysis at AJ Bell, said: ‘The market is convinced the Bank of England is going to raise interest rates this week, but the interest committee might want to take a deep breath and count to ten before pushing the rate hike button.’

The FTSE 100 was unshaken by the interest rate chatter, however.

It also brushed off the departure of Barclays boss Jes Staley over an investigation into his links with paedophile Jeffrey Epstein. 

The blue chip index climbed 0.7 per cent, or 51.05 points, to 7288.62, while the FTSE 250 was up 0.5 per cent, or 104.61 points, at 23211.22.

Shares in cyber-security firm Darktrace crashed 15.1 per cent, or 121p, to 681.5p. That is still above the 250p float price but well below the peak of 985p less than six weeks ago. 

A ‘lock-up’ period in which some investors were blocked from selling their stakes ends tomorrow – more than doubling the number of shares available to be traded.

The end of the 180-day block means tech entrepreneur Mike Lynch and his wife Angela Bacares could sell their near 16 per cent stake. 

It is piling further pressure on the company after a report from brokers Peel Hunt, which claimed a ‘disconnect’ between its value and the money it could make, knocked 21 per cent off its share price.

Darktrace went public in a blockbuster £1.7billion float in April and within months had joined the FTSE 100. It is now worth £4.8billion.

If shares continue on their current trajectory it could be ejected from the FTSE 100 after just months at the index’s quarterly reshuffle in December.

The company behind Brighton Pier said it returned to profit for the year ending in June. Brighton Pier Group’s shares rose 9.1 per cent, or 6p, to 72p as it said it made £4.2million profit in the year, compared with a £10.2million loss a year earlier.

Kitchen supplier Howden Joinery said increased demand thanks to people working from home continued to drive sales. 

Profits for the year would be at the top end of analyst expectations, close to £360million, it said. Shares rose 0.4 per cent, or 3.4p, to 923.2p.

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