“A moment of euphoria, and then a sharp intake of breath.” This is how one analyst described the City’s reaction to the Bank of England’s decision to cut the base interest rate by 1.5 percentage points to 3% last week.

Thursday’s decision caused a bounce in the shares of most UK housebuilders, including Persimmon, Barratt, Kier and Galliford Try. But a cut of that scale, while a potential boost to mortgage lending, also confirms the dire position of the economy. This, combined with the initial reluctance of banks to pass the full cut on to customers, meant that by Monday shares were heading back down. Matters weren’t helped by bleak statements from Bovis Homes, Galliford Try and Kier.

Even a temporary bounce, however, eluded Taylor Wimpey, which saw shares drop from 16p to 12p over the week. Its interim management statement on Tuesday beat expectations over the fall in reservations (27% is better than many of its peers) but confirmation that negotiations over its banking covenants would not be resolved until next year dominated traders’ responses.

One City source said: “Taylor Wimpey remains the highest risk stock. The price would need to move five or six pence to make a difference.”

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