Shares in Barratt Developments soared yesterday after reports that the embattled housebuilder had reached a deal with banks to put its finances on a firmer footing.

The company's shares jumped more than 25 per cent after Building magazine reported that the housebuilder had reached an agreement with banks to waive a clause that would have put Barratt in breach of its banking covenants after a land valuation writedown later this year.

Analysts said the reported deal was a encouraging sign that banks would help not to allow housebuilders to break their covenants.

The agreement would make other refinancing options that have been mooted in recent weeks, such as a debt-equity swap or a share issue, much less likely for the sector's most indebted company.

It was reported that the waiver would remain until Barratt had repaid the remaining £400million it borrowed to fund the £2.2billion acquisition of Wilson Bowden in February last year, and that it has until the 2011 to do so.

The banks - Royal Bank of Scotland, UBS, HSBC and Lloyds - joined Barratt in saying that they would not comment on the reports but the housebuilder confirmed that talks were continuing.

A Barratt spokesman said: “We continue to have constructive discussions with all of the banks and have nothing to add to our statement from last week.”

However, sources close to the talks played down the reports, saying no such deal had been made yet.

That did not stop the speculation sending shares in Barratt soaring, with other rivals such as Persimmon and Taylor Wimpey also seeing rises close to double digits on the back of the market rumours.

Shares in Barratt closed up 12 per cent, or 9.5p, to 87.75p.

The possible deal was first suggested last week when Mark Clare, the chief executive, said he believed “we could get some sort of waiver” from banks allowing limits to be breached temporarily while the company looked to secure funding from sales or from investors.

Despite the jump in price, Barratt's shares are currently worth a tenth of their value a year ago.

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