Shares across the housing sector slumped today after Persimmon revealed that it would stop building homes on new sites until mortgage conditions improved while speculation grew that Barratt may be forced to raise capital through a rights issue.

Persimmon, which is Britain's biggest housebuilder, said today that sales in the first four months of the year had fallen by 24 per cent.

Speaking before today's annual meeting (AGM), the company blamed the slump on unprecedented conditions in the mortgage market and called on the Government to scrap stamp duty for purchases under £250,000 for all first time buyers.

"This is not so much a pricing issue as about mortgage availability. For the first time in my experience there are not enough mortgages for the houses available," Mike Farley, chief executive of Persimmon, said.

"We think the Government has to do more to kick start the market. Helping first time buyers by scrapping stamp duty entirely would help the whole market place," Mr Farley told Times Online.

Overall, the FTSE 100 index of leading shares fell by 115 points to 5,968.6 as investors off-loaded shares in house building companies.

Shares in Persimmon fell 8.46 per cent to 595p and the rival Barratt Developments' stock dived by 10.95 per cent to 294.75p, as speculation arose that the company may launch a rights issue.

Barratt has also reported falling sales and has recently been attempting to sell its commercial property division to help to boost capital. It acquired Wilson Bowden last year.

Shares in Taylor Wimpey, which revealed a 26 per cent fall in new orders for houses last week, fell 8 per cent to 133.75p, and Redrow's stock declined by 6.48 per cent to 256.25p.

Figures out yesterday showed that the number of mortgages taken out last month fell by nearly 50 per cent to a record low.

Persimmon said that although visitor levels during March were encouraging, sales volumes remained flat.

However, over the past three weeks the unprecedented tightening in the mortgage market caused a further deterioration in the housing market.

April is traditionally the busiest time of the year for housebuilders; however, in the past three weeks the company said that it had seen lower sales volumes and increased cancellation rates.

The housebuilder would typically begin work on 30 sites a month between April and September but it has decided that there is no point in opening new sites while there is so little mortgage availability. It is currently working on around 500 sites across the country.

"There is no point spending money opening new sites if there are no mortgages to be had," Mr Farley said.

Total sales revenue for 2008 is £1.37 billion, compared with about £1.8 billion last year.

"We welcome the recent Government actions being taken to increase liquidity in the banking system with the key objective of kick-starting the mortgage market," Persimmon said in a statement.

"For this action to be effective it needs to result in an increase in the availability of credit for house purchasers, particularly first-time buyers."

Sales volumes are down by less, 18 per cent, because of the increase in the number of affordable homes that Persimmon is building in partnership with housing associations.

The housebuilder said that it was having to use discounts and incentives to tempt homebuyers, which would result in lower margins.

"Because of the uncertainties of the global economy and the UK lending environment it is difficult to predict when the market will improve," the housebuilder said.

It said that its priority was focusing on management of cashflows and close control of costs within the business to ensure that it maintained the strength of its balance sheet.

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