Barratt warns on housing slowdown

One of the UKs biggest house builders, Barratt Developments have warned that interest rate rises and the recent credit squeeze will hurt the housing market in the forthcoming coming months.

Its remarks came as it reported a 9.3% rise in annual pre-tax profit to £427.8m ($862.6m).

Recent turmoil on the financial markets has led to mortgage lenders putting up their rates and tightening up their lending criteria.

Barratt announced that the long-term picture for house prices was still positive.

Barratt said forward sales rose 67.3% to a record £1.4bn as of end-June and this had increased further to £1.7bn as of last week.

Pressure on lending institutions has led to a tightening of lending criteria and mortgage availability

Shares in the housebuilder jumped nearly 3% to trade at 746.5 pence in early trade.

But its shares are still down almost a fifth from a month ago with investors worried over the outlook for the housing market.

The housebuilder said it was not sure how long it would take the UK housing market to recover from recent events.

“The recent credit squeeze has further affected customer sentiment and pressure on lending institutions has led to a tightening of lending criteria and mortgage availability,” said Mark Clare, Barratt’s chief executive.

“It is not yet clear how quickly the market will recover but we have to assume that there will be downward pressure on volumes and price inflation in the short-term.”

Barratt became the third-largest housebuilder in Britain following the purchase of commercial property specialist Wilson Bowden for £2.2bn earlier this year.