Building Firms Hit By Possible Rate Rise

Housebuilders and property management firms have seen their share prices drop, amid rising fears of a base rate rise.

The dip comes after the Chancellor once again backed the governor of the Bank of England's plans to raise the base rate of interest.

Housebuilder Barratt Developments was the worst performing FTSE stock in percentage terms, declining by 3.5%, Persimmon (Frankfurt: OHP.F - news) fell 2.1% and building supply company Travis Perkins (LSE: TPK.L - news) fell 1.79% in late afternoon trades.

Governor Mark Carney said just over a week ago that rates might rise sooner than markets had expected, and many in the financial markets now think a hike could come before the end of the year.

On Monday morning Chancellor George Osborne told the BBC that he welcomed the bank's efforts to communicate its policy stance.

Mr Osborne said: "I think it is a good thing we actually have a bank governor who goes out and does a lot of television and radio and the like, and seeks to communicate clearly to people about the future path of interest rates."

The companies were also hit after weekend comments from Bank of England (BoE) policymaker David Miles.

Considered one of the BoE's most dovish members, he said it was increasingly likely he would vote to raise interest rates before leaving the BoE's monetary policy committee next May.

The housebuilding and property sector has been one of the best performing segments of the UK stock market over the last year.

Record (LSE: REC.L - news) low interest rates and home-buying incentives have pushed the FTSE 350 Construction & Building Materials Index up 23.4% in the last year.

However, the likelihood that interest rates may rise over the coming year has since tempered its performance.

As a result the materials index fell 1.5% on Monday.

JNF Capital trader Rick Jones said: "Interest rates may be rising sooner rather than later, and that's been the cause for a bit of a backlash for the housebuilders."