Britain’s largest housebuilders saw share prices fall sharply yesterday amid the prospect of higher than initially expected interest rate hikes. This follows the market reaction to last Friday’s mini budget.

Prices dropped as the markets reacted badly to the chancellor’s tax-cutting budget, as the value of the pound dropped against all major currencies.

Shares in Persimmon fell 6.2% yesterday. The drop for Taylor Wimpey, Barratt and Berkeley over the same period was 6.9%, 4% and 4.9% respectively.

There is growing concern about what may happen to mortgage rates in the near term, amid talk of further interest rate hikes.

The Bank of England said yesterday that it will “not hesitate” to increase interest rates to curb inflation after the pound fell to a record low against the US dollar.

The Bank said it was “monitoring developments closely” and would make a decision on any action in November.

Its statement came after the Treasury said it would publish a plan to tackle debt in a bid to reassure investors.

The pound fell again after the two statements and some UK lenders, including Halifax and Virgin Money, said they were halting new mortgage deals.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said if interest rates rise as predicted, the average household refinancing a two-year fixed rate mortgage in the first half of next year would see monthly payments jump to £1,490 from £863.

“Many simply won’t be able to afford this,” he explained.