Barratt mulls part-sale of shared-equity loan book

City Editor

Tuesday 9 August 2011

HOUSEBUILDER Barratt is in talks to sell part of its shared-equity mortgage book in a move that could unlock hundreds of millions of pounds lent by firms in an effort to kick-start the lacklustre property market.

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tim sharp

Barratt, Britain’s largest housebuilder by volume, issued a statement that confirmed it is in talks surrounding its shared-equity book, which is worth around £170 million. “Barratt confirms that it is in the early stages of looking at options to monetise part of its interest in this portfolio. There is no certainty that any transaction will be concluded.”

Housebuilders have increasingly used such loans, either backed by themselves or with the Government, since the credit crunch saw mortgage availability, particularly for first-time buyers, shrink.Shared equity schemes accounted for 22% of Barratt’s sales in the year to the end of June, falling from 27% a year earlier, according to the group’s trading statement issued in July. But others have made plentiful use of similar approaches.Shared equity schemes accounted for 37% of Scottish firm Miller Group’s reservations last year and almost half, 46%, the year before.In all, housebuilders have pumped almost £1 billion into the UK housing market in the form of shared equity loans over the last three years, according to the Home Builders Federation. This has resulted in close to 30,000 sales. By doing so, banks are more likely to provide a mortgage, knowing that there is less chance of them being unable to recoup the value of their loans.Usually this means the homebuyer has to find a smaller deposit than is currently being demanded by banks. The homebuilder, either by itself or teaming up with the Government, acquires an equity stake that is normally around 25% of the purchase price, but can be as much as 50%. By freeing up their money, housebuilders hope to be able to reinvest the money in land and new developments instead of having it tied up in homes they have already built. Analysts said the sale might attract interest from banks and private equity funds – looking to amass other shared equity portfolios. Any move to sell loans will only involve schemes offered solely by the housebuilder and not products offered in partnership with the Government. Shares in Barratt, which will announce its full-year results on September 14, climbed in early trading.But they later fell back as the wider stock market dropped, to close at 79.2p, down 3p or 3.7% on the day.

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Barratt mulls part-sale of shared-equity loan book

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