Bond markets settle as new chancellor ditches his predecessor’s mini budget

Share prices in major housebuilders have continued to rise this morning following a statement by the new chancellor Jeremy Hunt in which he rowed back on most of the measures set out in his predecessor’s “mini budget” less than a month ago.

Hunt’s statement confirmed the government is scrapping most of the unfunded tax cuts that had so spooked investors, with the exception of both the reversal in the planned National Insurance rise, and the cuts to Stamp Duty, which will particularly benefit housebuilders.

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The UK’s biggest housebuilder Barratt led the rises, with its share price leaping more than 0.5% in the minutes immediately after Hunt’s speech. It had already increased by nearly 3% in early trading amid early signs of the bond markets settling under the new chancellorship, and is now trading at more than 3.5% above its closing price on Friday.

Barratt has now seen its value recover by more than 14% from its low of mid-week last week, the point at which investors started predicting a government reversal was on the cards.

Housebuilders saw their market value crash by as much as 20% in the wake of the mini budget as mortgage lenders withdrew and then re-priced their mortgage products as borrowing costs rose amid fears over unfunded tax cuts and the likelihood of future Bank of England interest rate rises.

The average cost of a two-year fixed rate mortgage has already risen to above 6%, from less than 3% a year ago, and from just over 4.5% prior to the mini budget.

The cost of gilts had already risen prior to Hunt’s statement this morning, lowering yields, with the money markets seemingly having confidence that the government was not going to progress with unfunded tax cuts.

Shares in Barratt rivals Persimmon and Taylor Wimpey have now risen by 3.39% and 2.8% respectively today in the wake of the announcement. The news comes after Barratt last week reported that reservations have fallen by 47% year-on-year in recent weeks amid the turmoil created by the mini budget.

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The rises follow the sacking of former chancellor Kwasi Kwarteng on Friday by prime minister Liz Truss, alongside confirmation of the reversal of the planned cancellation of the rise in corporation tax from 19% to 25%.

Kwarteng’s replacement, former health secretary and foreign secretary Jeremey Hunt, used a series of interviews over the weekend to make clear he will steer the UK on a very different economic course, making clear the government went “too far, too fast” with the mini budget. Amid speculation he is likely to ditch or delay all of the tax-cutting measures in the mini budget, bar the cut to national insurance, Hunt said: “We have to be honest with people and we are going to have to take some very difficult decisions both on spending and on tax to get debt falling but the top of our minds when making these decisions will be how to protect and help struggling families, businesses and people.

The Treasury said this morning that Hunt will make a statement, expected at around 11am, “bringing forward measures from the Medium-Term Fiscal Plan that will support fiscal sustainability.”

This will be followed by a statement in the House of Commons later today, and publication of the medium term fiscal plan as previously expected on October 31.

Note: This story was updated at 11.44 to reflect the impact of the chancellor Jeremy Hunt’s statement on medium term fiscal measures