Barratt Developments yesterday confirmed it was in talks to sell off part of its portfolio of "shared equity" loans.
The move is being closely watched because if Barratt is successful it could lead to others trying similar moves and kickstart a revival of the trade in mortgage-linked products.
Barratt has a £170m portfolio of shared equity loans. The financing arrangements have become increasingly popular among first-time buyers, who have found it difficult or impossible to obtain financing from banks to fund house purchases.
They typically involve a house builder taking a stake of up to as much 25 per cent of a new home, usually in concert with the Government, for up to 10 years. At the end of the period – or if the house is sold before that – it will get 25 per cent of the market value of the property, and should make a return if house prices rise.
However, the products tie up a considerable amount of a housebuilder's capital which could otherwise be used to fund land purchases or the costs of new developments.
Barratt would have to sell the loans at a discount to their face value. The level of this "haircut" demanded by investors could yet scupper any deal.
But if Barratt, which is being advised by Credit Suisse, is successful it could prompt other builders that have sizeable loan books of their own, such as Persimmon, Redrow, Taylor Wimpey and others, to test the market.
The mortgage market remains difficult for first-time buyers, with banks and building societies still demanding substantial deposits to lend on reasonable terms. There is also concern about the Financial Services Authority's get-tough approach to mortgage sales, which housebuilders say could be a further stumbling block that prevents a return to normality in the market.Reuse content