Lack of lending 'will put brakes on market'

Barratt Developments warned that the shortage of mortgages is holding the housing market back, even as it reported a rise in selling prices.

The UK's third largest housebuilder said that its average selling prices increased by 7 per cent to £207,000 since June as it focused on building family homes in the South-east.

Barratt, which also trades as David Wilson and Ward Homes, said underlying property prices remained "stable". But unless there is a "significant" rise in the availability of mortgages the industry's growth prospects will remain constrained, it warned. Mortgages have become harder to get since the recession as lenders have demanded higher deposits, ruling potential first-time buyers out of the market.

The group, which returned to profit earlier this year after house prices slumped in the recession, said it expects a significant improvement in full-year profits.