Page last updated at 07:38 GMT, Wednesday, 14 May 2008 08:38 UK

Housing slowdown hitting Barratt

A lack of mortgage funding is hitting housing sales

UK house builder Barratt Developments has reported falling sales and rising cancellation rates as conditions in the market deteriorate "significantly".

Barratt said an "unprecedented" drop in the availability of mortgages and lower consumer confidence were behind the downturn in the market.

In the 19 weeks to 11 May, reservation rates were down by a third, with a big fall since the end of March.

Barratt said it had also seen more cancellations in the past six weeks.

Barratt's comments come a day after rival house builders Redrow and Galliford Try issued gloomy statements about the strength of the housing market.

We do not expect to see a meaningful upturn in the housing market until there are improvements in the availability of mortgage finance
Mark Clare, Barratt group chief executive

Redrow said reservation levels in 2008 were half that seen in 2007 and that cancellations had increased sharply since Easter.

Galliford Try said conditions were tough and that annual profits were set to be below market expectations.

Also on Tuesday, the Council of Mortgage Lenders said the level of mortgage lending to home buyers had hit its lowest point for 33 years.

Tough times

In its trading update, Barratt said net private reservations had averaged 276 per week.

That was up from an average of 244 for the first half of the financial year, but was down by 33.6% against the same period a year earlier.

Since the end of March this reservation rate had dropped to an average of 206.

Cancellation rates have been running at about 25% since the beginning of 2008, although Barratt said the number of cancellations had risen over the past six weeks.

Barratt added that the effect of the housing downturn was mixed across the country, with the Midlands and West worst affected, while the London and South East markets were "proving to be relatively more resilient".

However, it said it was seeing pricing pressures across all regions and was having to offer better incentives to drive sales.

Work on new sites was only being started "on a highly selective basis", it said.

"We do not expect to see a meaningful upturn in the housing market until there are improvements in the availability of mortgage finance," said Barratt's group chief executive Mark Clare.

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