Barratt shares 95pc down in housing gloom

Halifax Bank of Scotland, the UK's biggest mortgage lender, was also badly hit.

The sharpest fall  -  42 per cent at one stage  -  came in shares of Barratt Developments.

A Barratt Homes development in Royal Victoria Dock, East London. The firm's value has been slashed to five per cent of last year's peak figure

It was the third day of losses and meant Barratt's shares had shed a staggering 95 per cent of their value since the peak early last year.

In a torrid day's trading, there were also falls for Taylor Wimpey, Persimmon and Bellway.

Barratt is one of Britain's best-known homebuilders, having built and sold over 300,000 homes.

It was founded in Newcastle in 1958 by entrepreneur Sir Lawrie Barratt and operates from some 30 sites.

But its finances have been stretched since it snapped up rival Wilson Bowden for £2.2billion in February last year  -  at the top of the market. This gave the combined group a market value of £4.3billion.

Now, even though shares rallied to close only 21per cent down, at 721/2p, the group is worth just £251million.

City experts believe Barratt, which has debts of around £1.7billion, needs emergency funding of £1billion.

Chief executive Mark Clare tried to reassure investors there are no immediate funding issues, but did not rule out having to ask shareholders for rescue financing if the housing market slowdown worsens.

The falls in housing-related shares have now put at risk HBOS's own plan to raise a £4billion emergency fund.

Nearly 12 per cent was wiped off the lender's market value yesterday, leaving shares trading well below the 275p level at which investors are being asked to buy new stock.

The housebuilding sector is under pressure from a shortage of buyers, both because mortgages are more expensive and harder to obtain and on fears of a house price crash.

The Royal Institute of Chartered Surveyors said this week that estate agents sold fewer homes in the first quarter of this month than at any time since it began collecting data in 1978.

Figures for May from the Halifax and Nationwide also showed the steepest fall in house prices since the recession of the early 1990s.

Last night the leading City investment bank Merrill Lynch said the faltering housing market is in real danger of mirroring the 1990s recession that saw prices plummet and left thousands of families in negative equity.

Analyst Mark Hake said: 'We have gone beyond the tipping point and are clearly seeing a UK housing market being squeezed on opposing fronts  -  by a lack both of willing lenders and willing purchasers'.

He said the severity of the housing slowdown would be determined by unemployment trends. The gloomy warning came as official figures showed the fourth consecutive monthly rise in unemployment claimants.