UK house building slumps as interest rates rise

By David Milliken and Andy Bruce
July 6, 2023
Category: Finance & Economics
Region: International

LONDON — British house building fell in June at the sharpest pace in more than 14 years, apart from two months early in the COVID-19 pandemic, as higher borrowing costs dampened demand and weighed on the broader construction sector, a survey showed on Thursday. The S&P Global/CIPS construction Purchasing Managers’ Index (PMI) dropped to a five-month low of 48.9 in June from 51.6 in May, below economists’ forecast of 51.0 in a Reuters poll and the 50 level that divides growth from contraction. The decline was driven by a far steeper slump in the house building component, which slid to 39.6 from 42.7, its lowest since May 2020 and before 2020 the lowest since April 2009, when the global financial crisis hammered mortgage lending. …Last month the Bank of England (BoE) unexpectedly raised interest rates to 5% from 4.5%, and typical interest rates for two-year fixed-rate residential mortgages have risen above 6.5%.

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