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Ahead of today’s (26 November) Autumn Budget, I was reminded of a Ronald Reagan quote. In 1986, the former US President said the nine scariest words in the English language were: “I’m from the government, and I’m here to help.”
And in my opinion, all the leaks and speculation in the run up to the Chancellor’s speech were far from helpful. Indeed, Andy Haldane, the former chief economist at the Bank of England recently said that the government’s approach to the Budget has been “sucking all life” out of the economy. Not good.
But now that Rachel Reeves has sat down in the House of Commons, we finally have some clarity. And although there will inevitably be some losers from any Budget, I think the UK’s housebuilders could be among the net beneficiaries.
That’s because early indications are that the gilt market approves of the Chancellor’s package of measures. When the Office for Budget Responsibility’s report was accidentally published too early, the yield on 10-year government debt increased. But since then, it’s started to fall, which suggests bond investors are more relaxed about the Budget than initially feared.
One to consider
Changes in gilt rates generally feed through to the cost of mortgages. And this should help Persimmon (LSE:PSN). If borrowing costs fall it’s likely to help the housing market, which is starting to show signs of picking up after its post-pandemic slowdown.
The most recent report from the Bank of England revealed that net borrowing of mortgage debt by individuals rose by £1.2bn to £5.5bn in September. This was the highest since March 2025. The central bank also noted that the interest rate on newly drawn mortgages was the lowest since January 2023. This is likely to fall further if the current gilt market trend continues.
In its November trading statement, Persimmon said it was on target to meet the 2025 market consensus of 11,293 completions and an underlying profit before tax of £429m.
Early during the Chancellor’s speech, investors marked down the share prices of the UK’s housebuilders. I suspect they were disappointed that she didn’t announce any changes to stamp duty or introduce measures to help first-time buyers.
Alternatively, they may think the housing market recovery could stall. Also, they might be concerned that inflation is continuing to erode margins in the sector. I acknowledge these are both risks.
However, I remain optimistic about Persimmon’s prospects. Its properties have a lower average selling price than its peers. Also, its balance sheet is debt-free. In addition, it’s got plenty of plots on which to build. And with a yield of 4.6%, it’s good for income too.
That’s why, on balance, I think Persimmon could be worth considering.
On reflection
Finally, I think it’s worth noting that, from April 2027, the annual Cash ISA limit will be cut from £20,000 to £12,000 (for under-65s only). The government wants to encourage people to put more of any spare cash they have into a Stocks and Shares version.
Personally, I think that’s a good idea. Inflation is permanently eroding the value of cash and history tells us that by investing in quality stocks over the long term, the returns are likely to be greater. And in my opinion, there are plenty of these to choose from.
