Barratt warns of housing slowdown

Barratt is the UK's third-largest housebuilder

UK housebuilder Barratt Developments has warned that interest rate rises and the recent credit squeeze may hurt the housing market in the coming months.

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

Barratt said that sales of its homes fell as much as 10% in the week after Northern Rock got into difficulties.

But it expects the effect to be temporary and its long-term outlook for house prices is still positive.

Consumer sentiment

"It's just one week," said chief executive Mark Clare.

"It's simply a result of extensive media coverage and consumer sentiment had reacted to that," he added.

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

Barratt said forward sales rose 67.3% to a record £1.4bn as of the end of 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 Mark Clare, Barratt chief executive See Barratt shares here

Shares in the housebuilder had fallen 1.38% by late afternoon trading to 716 pence.

That fall comes on top of a slide of almost 20% in the past month as investors worried about the outlook for the housing market.

'Downward pressure'

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.