Persimmon, Britain's biggest homebuilder, yesterday reported a sharp fall in first-half profits after banks approved fewer mortgages amid the worst housing slump in more than 15 years.

Persimmon, Britain's biggest homebuilder, yesterday reported a sharp fall in first-half profits after banks approved fewer mortgages amid the worst housing slump in more than 15 years.

The York-based group posted a 64% fall in first-half, pre-tax profit and said it was cutting its dividend due to very difficult trading conditions and an uncertain outlook.

It said home sales were down 31% year-on-year, as buyers found it much harder to get mortgages, but that sales volumes since April had not deteriorated any further and cancellation rates were lower.

Persimmon, the biggest housebuilder by market value and number three by homes built, said it made £100.9m in pre-tax profit for the six months to end-June, compared with £281.1m last year. Net profit fell to just £26.4m in the first six months of the year, down from £196.6m for the same period last year.

The company cut its interim dividend to 5p per share from 18.5p.

Persimmon said it was hit by the reduction in mortgage lending, caused by the global credit squeeze, which resulted in the number of new homes it sold between January and June falling to 5501, down from 8002 a year earlier.

The Council of Mortgage Lenders said this week that mortgages for home buyers were around 50% down year-on-year, as the credit crunch continues to bite, while the Royal Institution of Chartered Surveyors last week warned that sales per surveyor were the weakest since records began in 1978.

Falling house prices across much of the UK - around 9% year-on-year according to the Edinburgh-based banking group HBOS - also inflicted damage on the company's bottom line, with average selling prices slumping 4.1% to £181,485.

To cut costs, Persimmon postponed construction on new sites in April, including some in Scotland, and announced that it was laying off 1100 office workers and cutting 900 more construction jobs across the company.

"The business has performed well in very difficult conditions," said chairman John White.

"We are confident that our business, having been restructured, is in a strong position to move forward whenever the market improves."

Some City analysts questioned the company's generally upbeat statement.

"We are surprised to see the group claiming that trading has not deteriorated since the slowdown in April, which flies in the face of comments from others housebuilders," said Landsbanki analyst Simon Brown.

Persimmon was the first publicly-traded UK construction company to announce its half-year results.

However, Britain's entire housebuilding industry is suffering from the same problems, leading analysts to anticipate that its bleak figures will be echoed across the sector in the coming months. Bovis Homes and Taylor Wimpey are due to announce their first-half results next week.

Earlier this month, building firm Bellway said agreed house sales between January and June of this year had dropped 45% compared to the same period in 2007.

Persimmon shares have lost around 76% of their value in London dealing over the last year.

However, a trading update the company published in July prepared the market for the bad news published in yesterday's earnings report, and so the company's shares enjoyed a boost in trading on the London Stock Exchange, closing 28.5p, or 9.5%, higher at 327p.

"The group largely paved the way in managing the market's expectations," said Richard Hunter, equity analyst at Hargreaves Lansdown Stockbrokers.

"As such, albeit from a low base, the shares have had something of a relief rally," he added.