Barratt Developments has ruled out any immediate need for a rights issue after pulling off a deal to extend its lending facilities.

Shares in Britain's second-biggest housebuilder climbed 24 per cent on news that it had pushed back repayments of a £400 million facility into 2011 and that lenders had relaxed their covenants.

Mark Clare, the chief executive, said yesterday: “With the refinancing package in place we see no immediate need to issue equity.” Mark Pain, the finance director, added: “We never discussed equity issuance with lenders and we gave no commitment to it during those discussions.”

The troubled construction company, whose shares have plunged 95 per cent in the past year, was tipped to be preparing an emergency rights issue or even a debt-for-equity swap, three weeks ago. However, it has been able to reassure investors. Mr Pain said that he expected to sign the deal with lenders within weeks, not months. “We have very detailed terms sheets and we're only down to the legal documentation now.” Barratt shares closed up 13p at 66p.

Barratt also confirmed that it was cutting 1,200 jobs in the face of a 43 per cent drop in house sales during the second half of the year. Job losses in the housebuilding industry since the beginning of the year are set to top 10,000 and since its merger with Wilson Bowden last summer, Barratt Developments has made 3,000 redundant and has been letting sub-contractors go since January.

Persimmon, Taylor Wimpey, Redrow and Bovis Homes have together cut almost 4,000 jobs in the past week.

Barratt is looking to reduce its operating costs and conserve cash by stopping work on 10 per cent of its 615 sites and selling non-core commercial developments. At the same time, it has scrapped the final dividend for the 2007-08 financial year, saying that its priority is to bring its debt levels down.

Mr Clare said the company's spending on land would drop from £1 billion to £600 million this year. He said the company was in the best possible position to face a downturn that could last at least another 12 months.

The chief executive will tour the company's 26 regional offices in the coming month and visit about 100 sites to reassure the remaining 5,500 workers.

Mr Clare said that the wider problems of the economy were beginning to bite and he was concerned that banks would have less finance available for private homebuyers as corporate customers, including retailers and housebuilders, try to refinance.

“To fix this, the mortgage market must recover. However, my concern is that mortgage availability will not get better. The best we can hope for is that it will remain the same,” he said.

Another concern the chief executive foresees is the problem of meeting any recovery in demand. With housing production set to fall to its lowest level since the Second World War, there is a danger there will be a significant gap between supply and demand when the mortgage tap is turned back on.

“The Prime Minister has made it clear that his priority is to build more houses to keep prices in check. Unfortunately, the industry has now gone the opposite way. This is a particularly British problem that will emerge when demand comes back,” he said, predicting a price bubble next year, or the year after.

“In a year to two years' time, we will have almost double our production. That will be quite a challenge,” Mr Clare said. In its trading update yesterday Barratt reported that total like-for-like completions had fallen by 13.8 per cent in the financial year and, in particular, private house completions were down by 18.4 per cent. Next year, it expects to complete just 14,000 houses, down from 17,168 last year.

Barratt has seen underlying average selling prices decrease by 5 per cent in the second half of the year but the company believes that prices will fall 10 per cent and expects to see further pressure on house prices.

“We have seen some city centre apartments fall in price by 20 per cent, while other types of property have held up,” Mr Clare said.

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