Housebuilder stocks rise in morning trading

The struggling housebuilding sector saw a ray of light this morning after news of a financial lifeline lifted the sector.

Builder magazine said that Barratt, which is due to announce its results in July, is in discussions with Royal Bank of Scotland, UBS, HSBC and Lloyds about waiving a clause that could have put the housebuilder in breach of its lending covenants after it writes down the value of its landbank next month.

Barratt’s was the best performer this morning on the FTSE 250 after shares rose 18% to 92¼p, which resulted in gains for other housebuilding companies.

Berkeley Group was almost 4% higher this morning at 734p, the company is heavily exposed to the housing market in the City.

Persimmon, which is due to be relegated from the FTSE 100, increased 5% to 383p, fuelled by reports of a Government plan to divert £1 billion of taxpayers money designed for social housing plans to buy new homes.

Taylor Wimpey increased almost 8% to 71¾p while Redrow increased 9% to 168p. Bellway Homes rose 7.5% to 170½p while Bovis Homes gained 5.2% to 363¾p.

The housing slowdown has meant that housebuilders have been suffering of late. Taylor Wimpey recently announced it was to close 13 of its 39 offices across the UK which is expected to result in 600 job losses. The job losses represent over 10% of its 4,700 UK workforce.

Last month, Bellway approached rival Redrow with proposals for an all-share merger worth £1.3 billion. The deal would produce the country’s second-biggest house builder in the UK.

However, it is believed that the proposals were broadly dismissed by Redrow, and the companies are not in merger talks

Toscafund, the hedge fund, recently increased its stake in Redrow and Taylor Wimpey, which resulted in speculation that there are more prospects for consolidation in the medium-term.

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