Housebuilders stocks were marked lower in early trade on 15th June as the clearest warning on UK house prices to date from Mervyn King, the governor of the Bank of England reverberated through the London stock market.  Speaking to the CBI in Scotland, the governor of the Bank of England issued his clearest warning yet to home owners that interest rates have further to rise and that house prices could fall.  King’s comments had an immediate impact on housebuilders, financial stocks and companies exposed to the housing market.

Analysts at SG Securities said: “As growth in household borrowing is a major driver of the UK consumption cycle, it is also a major driver of UK domestic plays in the equity market. So even though 45 per cent of UK equity market capitalisation is in defensives, the UK cannot avoid underperforming world equities if borrowing growth plunges.” Housebuilders are mainly found in the mid-cap FTSE 250 index.

Westbury fell 4 per cent, George Wimpey lost 3.8 per cent, Bellway shed 3.7 per cent, Persimmon and Berkeley Group lost 2 per cent, Redrow down 1.6 per cent and Bovis traded 0.8 per cent lower. In the FTSE 100, several banking stocks moved lower with HBOS off 1.1 per cent while Barclays lost 0.4 per cent.

With pressure entering the property markets worldwide from rising interest rates, perhaps this is the time to consider the ADASTRA Realty Fund for your portfolio's property exposure.  Based solely on US assets and with the capacity to perform in either a rising or falling interest rate environment, the Fund represents a sound hedge to what could otherwise be a negative point to property sector investment.