Shares in housebuilders tumbled on concerns that higher interest rates will follow today's stronger-than-expected inflation figures hitting the recovery in an already fragile housing market.
Top of the FTSE 100 fallers are Persimoon PLC and Taylor Wimpey PLC down 5.1% and 4.9% respectively with Barratt Developments not far behind, down 4.4. Berkeley Group PLC fell 4.0% while online property website Rightmove PLC (LSE:RMV) slipped 3.0%.
In the FTSE 250, Redrow PLC, Crest Nicholson Holdings PLC and Vistry Group PLC (LSE:VTY) declined 4.8%, 4.4% and 4.3% respectively.
Russ Mould at AJ Bell explained: "Bond markets took one look at the latest inflation figures and took the view that interest rates are going to keep going up."
"The UK 10-year Gilt rate jumped to 4.3% on the news, the highest level since last October and significantly ahead of the 3% level seen only three months ago.”
Ed Conway at Sky noted markets are now pricing in rises in interest rates to as high as 5.5%.
Oof
After today’s higher-than-expected inflation, traders in financial markets are now betting that UK interest rates will rise well above 5% later this year, perhaps close to 5.5%.
Not long ago they thought they’d peak BELOW 5%. pic.twitter.com/tjNPX9sPeO
— Ed Conway (@EdConwaySky) May 24, 2023
Investors fear further rises in interest rates could choke off any recovery in the housing market pushing mortgage rates for millions of borrowers higher.
At the beginning of the year, the Office for National Statistics estimated 1.4mln mortgages were up for renewal in 2023 with the peak between April and June.
An added problem for the Bank of England as it continues to fight to tame inflation and bring it down to its 2% target.