(Bloomberg) -- House builders slammed the brakes on construction at the start of 2023 as a surge in mortgage interest rates causes activity in the property market to freeze over.

The industry suffered its biggest contraction in almost three years in January after a slump in property prices and home loans gathered pace, S&P Global’s construction purchasing managers’ index showed Monday.

Britain’s biggest house builders are scaling back new developments amid warnings of large house price falls in 2023. Mortgage approvals have already tumbled to their lowest level since the first pandemic lockdown.

The overall construction PMI slipped deeper into contraction territory, falling from 48.8 in December to a weaker-than-expected 48.4. It was the lowest level since May 2020.

The monthly survey found that jobs are being shed at their fastest rate in two years even as cost and supply chain pressures cooled.

“The wrecking ball of higher inflation and interest rates has knocked the UK’s residential building output to its weakest since May 2020 as stretched mortgage affordability impacted on the building of new homes,” said John Glen, chief economist at the Chartered Institute of Procurement & Supply.

“There are still roadblocks ahead, but we should have faith that the sector can see a path through for better outcomes in 2023 after languishing in contraction in the last few months.”

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