More pain was inflicted on the British property market yesterday as property companies announced thousands of job cuts and new mortgage figures indicated that house prices would continue to fall.

Persimmon, one of the UK's biggest housebuilders, will shed 1,100 jobs - more than 20 per cent of its workforce - as it prepares for the housing market to deteriorate, bringing total job losses in the sector to 4,200 in a week.

The total of job losses is believed to be much larger, as these figures do not include the casual workers on building sites, many of whom are likely to be let go with little or no redundancy payments. Persimmon hopes to save £45 million a year by cutting down on full-time and casual staff.

Shares in Persimmon, which have plummeted by almost 90 per cent in the past 18 months, rose 4 per cent yesterday even though it revealed that its legal completions were down 31 per cent, average selling prices had fallen by 4 per cent and sales revenue was down 34 per cent to about £1 billion.

Two of Britain's four biggest housebuilders - Taylor Wimpey and Barratt - have already been forced to renegotiate their bank debts and dismiss 2,200 people. Redrow, the smallest of the four, has announced 200 redundancies and said that more may follow.

Mike Farley, the chief executive of Persimmon, told The Times: “This is not a short-term scenario. We think this will last for 12 to 18 months, depending on how the mortgage market reacts.”

New figures released yesterday show that the mortgage market is still declining rapidly, while house prices fell in May. The number of new home loans granted during May fell by

44 per cent compared with last year, while remortgaging activity declined as homeowners shunned escalating arrangement fees. According to the Council of Mortgage Lenders (CML), while mortgage lending volumes rose slightly by 4 per cent between April and May, on an annual basis the number nearly halved as home loan rates continued to rise. The remortgaging market also declined, falling 14 per cent between April and May and by 23 per cent compared with the same month last year.

The CML said that the fall in remortgaging activity may be due to the rising numbers of homeowners choosing to move to their lender's standard variable rate rather than paying a new arrangement fee.

Five years ago a typical arrangement fee was about £299, but some lenders have increased the cost as the mortgage market has worsened, with arrangement fees of more than £2,000 not unusual. This year Halifax, the UK's largest mortgage lender, raised the arrangement fee on its two-year fixed-rate deal from £499 to £1,499.

It also emerged that house prices had fallen in May by 0.3 per cent, according to data from the Department of Communities and Local Government. The average house price fell from £218,875 in April to £218,151, which is 3.7 per cent higher than in May last year. However, the 3.7 per cent rise is the lowest annual increase for 26 months.

Persimmon's chief executive called on the Government to lower stamp duty for first-time buyers to help to boost the market. Mr Farley said that the company was effectively cutting the volume of houses that it builds and he expects the number of houses built in the UK this year to fall by almost 40 per cent from last year's total of 180,000. It could fall below 100,000 in 2009, he said.

Barratt is expected to unveil a large writedown in the value of its land bank at a trading update tomorrow. Taylor Wimpey said last week that it had written down the value of its land bank by £660 million. Mr Farley said that although Persimmon would also have to write down the value of its land, it would be in the tens of millions.

Firstplus, the homeowner loans group owned by Barclaycard, said that it would stop taking on new business because of a fall in demand. This will lead to 300 people losing their jobs.

In decline

20% Size of cut in Persimmon’s workforce

90% Fall in Persimmon’s shares over past 18 months

44% Fall in number of new home loans in May over the previous year

Source: Times research

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