Britain's largest housebuilder put the market on red alert today as it revealed sales fell by up to 10 per cent over the past two weeks amid the credit crunch which hit mortgage lender Northern Rock.

Barratt Developments, which built about one out of every 10 new homes sold last year, said its sales had fallen between 5 per cent and 10 per cent over the week ending last Saturday compared with the week before.

Delivering annual figures today Mark Clare, chief executive of Barratt, said the company would typically see a "strong upward trend" in sales reservations in September, the end of the first quarter of Barratt's financial results.

Barratt is the first of Britain's housebuilders to go public on a sales fallout from the collapse of Nothern Rock. It cautioned that it was "not yet clear how quickly the market will recover" and said investors should assume that there will be "downward pressure" on the number of properties it sells in the short-term.

Barratt, which also owns the David Wilson brand of upmarket homes, also warned that growth in its own house prices is set to slow in the short-term.

Mr Clare said: "Was it a surprise? It was not a surprise. The challenge is how do you extrapolate from that - the consumers have quite rightly taken into account when buying. Is that going to recover fast? Our expectation is that it is but there is still uncertainty."

Mr Clare and his finance director Mark Pain predicted that the problems surrounding Northern Rock may mean house-hunters have to wait until the new year before there is a return to the "competitive frenzy" between mortgage lenders for cheap lending deals.

Fears over the reaction of the housing market were first stoked after Northern Rock, the UK's fifth largest mortgage lender, revealed earlier this month that the Bank of England had agreed to provide emergency support after wholesale debt markets closed down.

Northern Rock is one of the country's largest lenders of cheap mortgages. Its removal from the market could leave house-hunters with fewer affordable mortgage deals. That in turn could hit house sales even further.

Trading updates from housebuilders tend to be the most up-to-date read on the housing market as they measure their sales reservations on a weekly basis, providing hard evidence of buyer confidence.

Mr Clare added: "Nothern Rock was a strong competitor in the market. There is every sign it will become part of a bigger financial institution. So there will be a period of where there is perhaps less competition. How quickly it gets back to the competitive frenzy suffered for many years is unknown. There will be a period of tigtening."

Hardest hit has been sales of Barrat's flats in the Midlands and North of England - particularly around Northern's Rock's home town of Newcastle.

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