London's blue-chip index edged higher on Monday, propelled by a sharp rally in UK housebuilders following the government's announcement of a new first-time buyer support scheme. The FTSE 100 opened approximately 0.26% higher, with Barratt Redrow surging nearly 15% and Persimmon climbing about 16%.
The gains were also supported by oil majors, as Brent crude moved back above $106 a barrel, adding around 1% to Shell and BP. This followed a 0.14% rise on Friday, when the index closed at 10,695.25.
Housebuilders Lead on Policy Support
The most significant move came from the housing sector after the UK government confirmed plans for a new equity-loan programme, named 'Your First Home', to be detailed in the October Budget. The scheme is expected to allow eligible first-time buyers to purchase new-build homes with deposits of just 2.5%, backed by government equity loans of 20%.
This policy aims to tackle housing affordability while simultaneously supporting demand for new construction. The announcement provided a much-needed boost to a sector that has struggled with weak demand, high mortgage costs, and a slower construction market throughout 2026. Barratt Redrow, Taylor Wimpey, Persimmon, and Vistry all saw significant share price increases.
Morningstar analyst Jack Fletcher-Price noted earlier this month that Barratt Redrow appeared attractively valued relative to its listed UK peers, despite the challenging housing environment.
Oil Rally Provides Support but Raises Concerns
The FTSE 100's heavy weighting in energy stocks provided another source of support, but the same oil rally poses risks to the broader market. Brent crude rose above $106 after US President Donald Trump rejected an Iranian proposal related to reopening the Strait of Hormuz, although further talks were expected. Higher crude prices lifted Shell and BP, helping to underpin the index.
However, expensive energy is also feeding inflation expectations and keeping pressure on bond markets, which is problematic for retailers, property companies, and other rate-sensitive stocks. AJ Bell investment director Russ Mould told Sharecast last week that the earlier decline in oil had brought welcome relief because elevated energy costs were intensifying inflation concerns.
European Markets Rise, but Bond Yields Cap Gains
The broader European market also edged higher, with the STOXX 600 up about 0.3% in early trading. Most major regional markets were positive, but gains remained modest as investors weighed higher oil prices and restrictive monetary policy.
Mining shares were among London's weakest performers as a stronger dollar pressured metals. Fresnillo, Endeavour Mining, Antofagasta, Anglo American, Glencore, and Rio Tinto fell between roughly 2% and 5.5% in early trade.
Investors were also monitoring remarks from Bank of England Deputy Governor Dave Ramsden on quantitative tightening. The Bank has estimated that QT has added about 20 to 30 basis points to gilt yields, although Ramsden has characterised that contribution as small compared with the broader rise in term premia.
This article is for informational purposes only and does not constitute financial advice.
