Battered UK homebuilder shares set for biggest daily rise in five months

LONDON, July 18 (Reuters) - UK homebuilder shares headed for their biggest one-day gain since February on Tuesday as expectations grew that British interest rates might peak sooner than initially feared.

An index of London-listed homebuilders rose as much as 4% and was set for its biggest daily rise in more than five months, having fallen 12.15% in the second quarter on top of a 44.4% slump in 2022.

Shares in Taylor Wimpey, Barratt Developments and Persimmon rose between 3% and 5%, while mid-cap Vistry rose more than 5%.

Britain's housing market has been hit by declining affordability and rapid increases in interest rates as the Bank of England (BoE) raised interest rates at its last 13 meetings in an effort to bring down persistent inflation.

Neil Wilson, chief market analyst at Finalto, said investors are buying the oversold sector. "I sense the U.K. housing outlook been too bleak and rates won’t go as high as previously indicated by the market," he said.

Traders now see BoE interest rates peaking at around 6.00% in December, having earlier this month priced in rates rising as high as 6.5% by March.

Investors are also awaiting UK consumer price inflation data for June scheduled for Wednesday.

Data from market researchers Kantar showing British grocery inflation eased for a fourth straight month in July had been welcomed, said Susannah Streeter, an analyst at Hargreaves Lansdown.

"If the trend accelerates, it could potentially lead to fewer rate hikes from the BoE ahead", Streeter said.

A survey from property website Rightmove showed on Monday that asking prices for residential homes in Britain fell in July, as rising mortgage costs and increasing buyer affordability constraints prompted sellers to temper price expectations. (Reporting by Joice Alves and Anchal Rana; Additional reporting by Danilo Masoni; Editing by Amanda Cooper and David Holmes)