Market reacts positively to Bank of England's stategy on reviving Northern Rock
Shares in housebuilders began to stage a recovery this morning as the Bank of England revealed further measures to cope with the Northern Rock crisis.
The Bank said this morning that it would guarantee the deposits of Northern Rock customers, a move which should ease the flow of panicked withdrawals from the mortgage lender. Northern Rock customers around the country have been queuing to withdraw deposits since the company revealed last week that it had asked the Bank for emergency funding to cope with financing shortfalls caused by the global credit crunch.
The Bank also injected an extra £4.4bn into the UK financial system in an “exceptional tender”, which brought overnight lending rates down.
Shares in housebuilders, which have plummeted since Friday, were up this morning on the back of the news – although still significantly lower than recent highs. Persimmon, which yesterday dropped 6.9% to 946p, has climbed back to 955.5p. Redrow, which yesterday dropped 7.0% to 438, is now up to 444.8p, while Bovis Homes has climbed to 672p from yesterday’s close of 662p.