Barratt has announced that the refinancing package agreed with its banks has now been signed and come into effect.

The package, which was first revealed by Building seven weeks ago, will see the banks relax the lending covenants that the housebuilder feared it might breach as a result of the market downturn.

A company statement said:

“Under the terms of the deal, banking agreements will now be linked to cash flow rather than interest repayment.

A breach was expected owing to Barratt’s £1.8bn debt.”

One analyst said: “There’s no such things as a free lunch. This deal effectively puts the banks in the driving seat.”