London’s FTSE 100 gains tamed by traders dumping house builders on property price jitters

London’s FTSE 100 was tamed today by traders ditching the UK’s largest house builders on fears the property is headed for a sharp slowdown.

The capital’s premier index’s gains were held to 0.66 per cent, finishing at 7,094.53 points. 

The domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, dropped 0.15 per cent to 17,889.93 points.

Investors are souring on some of Britain’s housing giants due to rising interest rates and a cost of living squeeze engineering an affordability crunch.

Prospective buyers are facing taking on mortgages with rates as high as six per cent, driven by lenders passing on a series of seven rate hikes from the Bank of England. 

Rates were also goosed due to former prime minister Liz Truss’s mini-budget roiling financial markets. They have since curbed from their peaks.

Berkeley Group and Taylor Wimpey shed 1.136 per cent and 1.24 per cent respectively yesterday.

Figures out from property search site Zoopla today revealed housing demand sank a third in the weeks after the mini-budget on 23 September, driven by higher mortgage costs pricing people out of the market.

However, UK banks climbed sharply yesterday, likely on the prospect of the Bank raising rates 75 basis points on Thursday, the biggest rise since 1989.

NatWest finished up 4.4 per cent and Lloyds Bank advanced 1.82 per cent.

Lenders tend to benefit from higher interest rates by allowing them to charge more for loans.

The pound resumed its slide against the US dollar, weakening over 1.3 per cent to buy $1.1461, failing to boost London’s FTSE 100.

Pound/US dollar exchange rate

UK debt costs inched higher today. The yield on the 10-year gilt jumped four basis points, while the 30-year gilt yield added around basis points. Yields and prices move inversely.

Oil benchmarks Brent Crude and WTI fell around two per cent and three per cent respectively.