Shares in housebuilders rallied after the Government unveiled measures to boost Britain’s troubled housing market.

Stocks across the sector advanced amid hopes that the measures, which include a year-long stamp duty holiday on homes worth up to £175,000, will boost housebuilders’ fortunes. Housbuilding companies, which have been expecting government action for some time, are under pressure from falling house prices and lower demand from potential buyers struggling to get loans as banks tighten lending.

In theory, the Government’s move could help housebuilders to turn work in progress into cash more quickly, keeping them within their bank covenants. However, there was a mixed reaction to the news, with the City reflecting that although any action was welcome, it was unlikely to make a meaningful difference to the market. The Council of Mortgage Lenders said that the plans would have “no significant effect”. There was also concern that the complexity of the proposals could delay first-time buyers. Government action came as the Chartered Institute of Purchasing and Supply’s housing index showed that housebuilders’ activity had contracted for a ninth successive month in August.

Persimmon rose 39p to 424¼p, Taylor Wimpey gained 4¾p at 60¾p and Bovis Homes was up 37p at 487¾p.

Better news for the housing market was welcomed by newspaper stocks, which gain from estate agents’ advertising. Trinity Mirror rose 11¾p to 122p and Johnston Press 4½p to 53¼p.

Overall, the FTSE 100 rose by 17.9 points to 5,620.7, as the housing proposals and a slump in the oil price gave a boost to consumer-focused stocks and big users of fuel. Carnival, the cruise ship operator, led the index, up 139p to £20.30. British Airwaysrose 11½p to 273¼p as oil fell as low as $105 amid early reports that Hurricane Gus-tav had spared oil infrastructure along the Gulf Coast of the United States.

Greene King, the Suffolk-based pubs group, rose 48½p to 581p and cheered the rest of the sector after reassuring investors that it was likely to meet full-year expectations, although it did admit that it was uncertain of prospects for future trading as consumers’ dwindling budgets led them to drink alcohol at home rather than at the pub.

RSA, the commercial insurer, rose 5.2p to 161.9p despite the surprise departure of Bridget McIntyre, the highly respected UK chief executive for the past three years. Ms McIntyre, who will be replaced by Adrian Brown, the chief operating officer, is leaving to spend more time with her family. Dealers said that bid speculation was keeping the shares buoyant.

Gains were offset by oil stocks and miners tracking lower commodity prices. John Wood, the oil services group, was the index’s heaviest faller, down 26¾p to 428½p. Tullow Oil fell 40½p to 750½p. BHP Billiton, down 67p to £15.81, and Rio Tinto, 180p lower at £48.30, also learnt that European Union regulators had put an antitrust inquiry into BHP’s bid for Rio on hold because the companies had not provided information.

New York: A fall in oil prices did not counter nervousness about the economy and the financial sector and stocks slipped from their highs. The Dow Jones industrial average closed down 26.6 points at 11,516.90.

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