Nov. 3 (Bloomberg) -- Taylor Wimpey Plc, the U.K.'s largest homebuilder, led rivals higher as investors bought shares to close short positions and bet that the Bank of England will cut borrowing costs.

Taylor Wimpey rose 38 percent to close at 13.75 pence, while Barratt Developments Plc gained 12 percent to close at 86 pence.

``There has been some short closing,'' Panmure Gordon & Co. analyst Mark Hughes said by telephone. ``Also, deeply cyclical, highly volatile stocks -- which have been hammered of late -- are bouncing as the market has bounced back.''

British homebuilders are facing the biggest housing slump in 25 years as a seizure in global credit markets prompts lenders to withdraw mortgages, pushing down house prices. Taylor Wimpey is battling to survive the slowdown as turmoil in financial markets weakens the company's prospects for renegotiating debt. The company, which has fallen 93 percent this year, has until February to secure a rescue package with lenders.

``Expectations of interest rate cuts can be seen at the margin to be helpful, in particular to those companies that are really struggling,'' Hughes said. ``If it was to bring back even a small amount of volume, then it could mean the difference between surviving the next 12 months or not.''

Taylor Wimpey advanced 3.75 pence. The stock closed at 8.84 pence on Oct. 27, its lowest level in at least 20 years. Barratt today rose 9 pence, while Persimmon Plc, the U.K.'s second- largest homebuilder by value, increased 6.9 percent to 320.75 pence.

The median of 60 forecasts in a Bloomberg survey is for the Bank of England to lower the key interest rate by half a percentage point to 4 percent on Nov. 6. Sixteen economists forecast a larger cut.

A short position involves borrowing shares and selling them on the expectation that they can be repurchased later at a lower price before paying back the loan, with the borrower pocketing the difference.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net.

Last Updated: November 3, 2008 12:00 EST