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Housebuilder shares tumble as Carney clamps down on property market

by: Dan Jones
  • 28/11/2013
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Housebuilder shares tumble as Carney clamps down on property market
Shares in UK housebuilders have tumbled after the Bank of England said it will end the Funding for Lending (FLS) scheme for mortgages a year early.

The Bank announced this April that the scheme is to be extended to January 2015, but altered its decision this morning so that the extension only applies to business loans.

Funding for mortgage loans, which has helped cut mortgage rates since implementation in July 2012, will now come to an end on 31 December.

“Having considered the views of the Financial Policy Committee, the [Bank of England’s] Prudential Regulatory Authority has decided that additional stimulus for lending to households is no longer required,” the BoE said in a statement this morning.

Shares in Barratt Homes slumped as much as 9% on the news, with Taylor Wimpey down 6.7% and Persimmon falling 5.5% as investors fretted over its impact.

The drop follows a huge re-rating for the sector over the past 12 months after the UK housing market began to pick up steam.

The likes of Taylor Wimpey have enjoyed share price rises of over 90% during that period, prior to today’s fall.

“The changes announced today refocus the FLS where it is most needed – to underpin the supply of credit to small businesses over the next year – without providing further broad support to household lending that is no longer needed,” said Bank governor Mark Carney.

The government’s Help to Buy schemes, designed to aid lower-deposit borrowers rather than lenders, remains in place.

But the Bank outlined a number of possible future options to cool the property market in its Financial Stability report this morning, including recommendations to the Treasury over the appropriateness of Help to Buy.

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