UK stocks eased back on Wednesday with real estate and home construction issues pacing losses in the wake of data showing a big slowdown in house price growth amid surging mortgage artes.
Official data revealed a decline in the annual rate of growth of house prices from a 13.1% clip in August to 9.5% for September.
They also showed that house prices were unchanged month-on-month, the first such reading since October 2021.
Gabriella Dickens at Pantheon Macroeconomics that even if Bank stopped raising rates at 4.0% as they expected, that would suffice for the average two-year fixed rate mortgage to jump to 5.3% versus 1.6% at the end of 2021.
As a result, buyers would need to commit to average monthly mortgage payments of 30% of household disposable income versus 22% at year-end 2021, even as disposable incomes were set to be hit again in the front half of 2023 as government withdrew support for energy bills, austerity was implemented and unemployment rose.
Pantheon was forecasting an 8% peak-to-trough decline in house prices, an amount equivalent to a third of the rise seen since the pandemic.
In the background, the yield on the benchmark 10-year Gilt was off by 15 basis points to 3.147%.
That was despite data showing that consumer prices in the UK accelerated to a year-on-year pace of 11.1% in October, against 10.1% for September (consensus: 10.7%).
Nonetheless, Pantheon believed that the peak for UK inflation was now in and that Bank would stick with a 50 basis point rate hike at its next meeting.
Looking further ahead, CPI inflation was seen eventually falling beneath 2% in 2024, so long as energy prices weren´t surging again or indirect taxes had increased.
Top performing sectors so far today
Aerospace and Defence 4,694.45 +1.90%
Tobacco 35,366.35 +0.95%
Beverages 27,814.42 +0.81%
Software & Computer Services 1,883.76 +0.73%
Personal Care, Drug and Grocery Stores 4,066.35 +0.64%
Bottom performing sectors so far today
Automobiles & Parts 1,303.26 -6.09%
Real Estate Investment & Services 2,190.22 -3.35%
Travel & Leisure 6,344.20 -2.93%
Leisure Goods 17,933.11 -2.84%
Industrial Transportation 3,586.67 -2.74%
