After inflation drops, UK property stocks are driving the FTSE 100 up.

Investors lowered their expectations of where interest rates will peak following a lower than expected inflation rate in June.

Persimmon rose 8.3 percent, while Barratt Developments, Taylor Wimpey, and Taylor Wimpey each rose 7.8 percent. This helped London’s FTSE 100 to close 1.8 percent higher after data revealed that UK inflation in the month of last year dropped to 7.9 percentage points. It was a 15-month record low.

According to Russ Mould of AJ Bell, the modest drop in inflation that occurred in June will be a welcome relief for property groups, homebuilders, and other rate sensitive sectors, which dominate the FTSE100.

Mould explained that if there is even a hint of a rate peak, it would be possible to make a case in favor of the FTSE 100 due to its exposure to banks, builders, insurers, and staples. “The thinking will be that if rates are rising more slowly, then we’re close to the top. After the top, there must be a reduction.”

UK Property has had a difficult few months, as the Bank of England increased rates to 5% to combat the stubborn UK inflation problem. Mortgage rates have increased due to higher borrowing costs. This has also affected sales and raised concerns about a possible drop in house values.

Barratt said last week that demand for new homes fell by almost a third over the past year, ending June 30. This comes shortly after Berkeley Group reported a 15 percent drop in sales on a comparable basis between April and the end of the year.

Chris Druce said that successive rate increases by the BoE “had reduced buyers’ spending powers, weakened the sentiment in the UK real estate market, and acted as an inhibitor on activity”.

Druce said that a single modest fall in inflation would not change much. “Nerves will not be calmed, and the outlook won’t improve until buyers gauge where the next peak in the bank interest rate will be.” The relatively benign June inflation numbers come after several months of higher than expected prices. On Wednesday, traders lowered their estimate of the interest rate peak to just below 6 percent.

Some warn that rates will continue to rise, further pinching homeowners and prospective buyers. Clare Batchelor is the mortgage operations manager for Wesleyan. She said that “the [BoE] must finish its job in order to bring inflation down to 2 percent.”

Batchelor stated that if the prices continue to rise too rapidly, there could be more rate increases in this year. This will raise alarms for anyone looking to get a mortgage, or about to switch to a variable rate deal.

Halifax, a mortgage provider, reported that house prices dropped at their fastest pace in 2011 during June. The average rate for a fixed-rate mortgage of two years was 6.66 percent last week, which is the highest since 2008.

Separate data released Wednesday showed that private rental prices paid by UK residents increased by 5.1 percent in the 12-month period ending in June. This is the largest percentage change recorded by the Office for National Statistics since January 2016.

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