Housebuilders and homebuyers were celebrating after the Bank of England cut interest rates, but it was bad news for pensioners and savers.
Shares in FTSE 100 housebuilders and property groups were among the biggest risers on Thursday after the bank’s monetary policy committee cut rates by 25 basis points to 0.25%.
The rate cut was the first since March 2009 and takes the UK cost of borrowing to its lowest since 1694.
Persimmon was the top flight’s third biggest riser with a 3.4% increase to 1692p while shopping centre developer Intu Properties was fifth with a 3.1% gain to 304.3p.
Taylor Wimpey plc (LON:TW.) advanced 2.15% to 151.9p and Barratt Developments ticked up 1.5% to 428.5p.
Naomi Heaton, chief executive of London property adviser London Central Portfolio, said the rate cut could have a different impact on the market depending on location.
“Many borrowers may see the move as headline ‘good’ news. However, a response by the banks, similar to that seen during the credit crunch, could have a particularly negative impact on domestic borrowers in areas such as Greater London and the rest of the UK,” she said.
Analysts forecast further woe for savers from the record low interest rates, although some said it presented an opportunity for those offering other types of investment.
Hargreaves Lansdown senior analyst Laith Khalaf said: “The nightmare for savers continues, and they now face a lost decade of returns on their cash.
"If anything things are getting worse, not just because savings rates will fall, but because inflation is forecast to rise, eroding the buying power of cash in the bank.
"The stock market remains the only game in town when it comes to generating an income, and today’s decision reinforces that fact once more.
"Those moving up the risk spectrum must be willing to take a longer term view however because of the volatility of share prices."
The pound, which has slumped to 31-year lows in the wake of the EU referendum outcome, dropped 1.4% to US$1.31 following the rate decision.
Craig Erlam at foreign exchange trader OANDA said sterling could see further pressure on the US$1.31 support level in the near-term.
If that is broken, the pair could be headed back towards the post-Brexit lows around US$1.28, he said.
He added: "The triple whammy of a rate cut, an increase in bond buying – both government and now corporate – and a new term funding scheme against the backdrop of significant reductions to growth forecasts over the next couple of years clearly demonstrates how concerned policy makers are about the economic outlook post-Brexit.
"Given these gloomy forecasts take into consideration the sizeable stimulus package announced, it’s clear that a bumpy and uncertain road lies ahead, at least in the view of the BoE."
In justifying the bank's action, Carney claimed there was a ‘clear case’ to act now, with the week’s woeful PMIs joined by fresh forecasts from the Bank of England that 750,000 people stand to lose their jobs post-Brexit.
The bank also now expects the UK economy to grow by a meagre 0.8% next year against the 2.3% previously estimated, with inflation set to jump to 0.8% in 2016 and 1.9% in 2017.