UK construction data revised higher
New figures out on Friday showed that British construction output grew faster than previously thought in the first quarter, but could slow in the next three months; particularly after the government took steps to cool the housing market.
Chancellor George Osborne said on Thursday that he would give the Bank of England stronger powers to curb mortgage lending, while BoE Governor Mark Carney said interest rates could rise sooner than financial markets expect.
The comments sent sterling and short-dated British government bond yields soaring and caused shares to plunge, with house builder’s particularly hard hit. Some 1.7 billion pounds has been wiped off the value of the six house builder’s and two property groups.
Economists say Osborne’s announcement means the Bank may adopt a more direct approach when trying to curb mortgage lending. It is expected to announce more controls after its Financial Policy Committee meeting this week.
Victoria Clarke, an economist at Investec, said “Such a move could further dampen mortgage activity with eventual read-across to the house building sector over the months ahead, perhaps providing a modest drag to otherwise positive momentum in the UK’s macro recovery”.