House builder shares listed in London jumped after the Bank of England voted to keep rates on hold, surprising the markets that expected a rise in rates to fight inflation.
House building shares such as Taylor Wimpey, Persimmon, Berkeley Group Holdings rose following the announcement as investors looked forward to further support for the UK housing market through lower rates.
“House builders were among the stocks to make immediate gains on the announcement with Taylor Wimpey, Persimmon and Barratt Developments also up by more than 2%. With no splash of cold water imminent to cool down the red hot housing market, the expectations are that demand for new homes will continue to be brisk as the race for space continues,” said Susannah Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown.
Whilst house builders investors will welcome the news, banking shares fell as the prospect of higher net margins disappeared.
Analysts pointed to the inconsistency of inflation data as reason why the Bank of England held of raising rates for the first time since the pandemic.
“No doubt some will characterise this latest decision as the Bank bottling it, but there are pretty sound reasons to hold off on hiking rates right now. The Bank’s judgement that inflation is transitory hasn’t really been tested, as it’s only six months that CPI has been marginally above target, and in fact the inflation index fell back at the last reading,” said Laith Khalaf, head of investment analysis at AJ Bell.
“Although inflation is now predicted to peak at 5% next April, the data is notoriously unreliable at the moment, thanks to the distortions created by the pandemic, and a synchronised emergence from it in Europe and America.”