U.K. Homebuilders Fall on Report Help to Buy May End Early

(Bloomberg) -- Britain’s biggest homebuilders fell in London trading after Property Week reported that the government could cancel a program that provides five-year interest-free home loans.

A spokesman for the Department for Communities and Local Government said by email that its incorrect to infer from a review of Help to Buy that the government is considering canceling it early. The DCLG is considering all options for the Help to Buy scheme when it runs out in 2021, as it said in a policy document in February, but it didn’t tell Property Week that the scheme could be wound down or replaced before then, he said.

The FTSE 350 Household Goods & Home Construction Index fell as much as 2 percent after Property Week reported that a government review could lead to Help to Buy ending before the expiry date. Persimmon Plc was the worst performing stock on the benchmark FTSE 100 index, dropping as much as 6.9 percent and Barratt Developments Plc fell as much as 5.6 percent, the most since October. Homebuilder shares rallied following the government response to the Property Week report.

Home values have surged about 86 percent since 2009, pricing many young buyers out of the market, according to Hometrack. Rising costs prompted the U.K. government to announce the Help to Buy program in 2013, providing guarantees that allow people to buy a home costing as much as 600,000 pounds with a down payment of as little as 5 percent.

Purchases through Help to Buy account for 38 percent of all new private home sales and its closure could reduce homebuilder profits by about 10 percent, Liberum Capital Ltd. analysts including Charlie Campbell wrote in a note to clients Friday. The review may or may not lead to a cancellation but it signals that the government’s wholehearted support for the scheme has eroded, the note said.

To contact the reporters on this story: Jack Sidders in London at jsidders@bloomberg.net, Sharon Smyth in London at ssmyth2@bloomberg.net.

To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Ross Larsen, Andrew Blackman