U.K. homebuilders fell the most in 10 months, led by Persimmon Plc and Taylor Wimpey Plc, after Bank of England Governor Mark Carney signaled borrowing costs may start to rise earlier than anticipated. That would limit the amount homebuyers can borrow and could stifle value gains.
The Bloomberg EMEA Homebuilders Index closed down 4.6 percent, the most since Aug. 15. Persimmon, the largest company in the index by market value, lost 7 percent, while Taylor Wimpey declined 6.3 percent.
An increase in the Bank of England’s benchmark rate, which can affect the amount paid by homeowners for their mortgages, “could happen sooner than markets currently expect,” Carney said in a speech in London last night. Investors hadn’t expected rates to be raised until April. The central bank will also get new powers from Chancellor of the Exchequer George Osborne to curb home loans as record-high house prices fuel concerns that a bubble may be forming.
“Housebuilders tend to underperform in a rising rate environment,” Charlie Campbell, an analyst at Liberum Capital Ltd. in London, wrote in a note today. “Early-cycle rate rises, which happen as the economy is improving, are much less malign than rate rises at the end of the cycle.”
Home values in six of London’s 10 most expensive boroughs fell in April as the luxury housing market cools, Acadata Ltd. and LSL Property Services Plc said in a report today. Barratt Developments Plc, which bought a stake in CPC Group’s Sugar Quay luxury-homes project in the City of London last month, fell 6.3 percent today, the third-biggest decline among stocks in the homebuilder index.