British builders are suffering from rising borrowing costs as investors lower their bets on Bank of England rate cuts

Shares in British housebuilders tumbled yesterday as investors scaled back their bets on Bank of England rate cuts in the wake of the budget.

On a day of turmoil in financial markets amid concerns over Rachel Reeves’ lending plans, blue chip developer Persimmon fell 7.5 percent, while Bellway fell 7 percent and Taylor Wimpey fell 6.7 percent.

The sell-off came as analysts warned that interest rates would not fall as far or as quickly as expected before the budget.

Investors are now betting on another rate cut this year, expected next week.

The borrowing binge announced by the Chancellor in the budget is expected to put upward pressure on inflation, preventing the Bank from cutting interest rates too quickly.

Her plans have caused unrest in the bond markets and analysts warn that the sharp rise in government bond yields will feed through to higher mortgage costs.

Laith Khalaf, head of investment analysis at AJ Bell, said: ‘Based on what’s happened with two-year government bonds, we could see mortgages rising again just when borrowers thought we were on a solid downward path. ‘

After next week’s rate cut, investment bank Goldman Sachs said it expected the Bank of England to put it on hold next month, which would be a blow to millions of borrowers.

Before Rachel Reeves announced her budget, markets had already made two cuts this year.

But traders now see a less than one-in-three chance of a second cut in December.