One of Britain's biggest property developers stops building new homes as mortgage meltdown worsens

Persimmon said the lack of cheap mortgages is having a devastating impact on its business.

It warned that the number of potential buyers is shrinking at a record rate - few have the confidence to enter the market - and prices are falling.

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Mike Farley, the firm's chief executive, said: "We're not going to build more when we're unable to sell what we have."

Persimmon's plight is the latest worrying sign of the property market decline, which is the result of a dramatic fall in the availability of home loans.

The mortgage drought got even worse yesterday when the Britannia revealed a 0.75 percentage point increase on its popular fixed-rate mortgages - one of the biggest single jumps in rates since the crisis began.

Shares in all firms in the housebuilding sector tumbled after Persimmon's bleak statement to the stock market yesterday.

Around £420million was wiped off the shares of the five biggest housebuilders - Barratt, Taylor Wimpey, Persimmon, Berkeley Homes and Bellway.

Persimmon pleaded with the Government to raise the stamp duty threshold, which starts at £125,000, and cut interest rates further in an effort to revive the housing market.

Yesterday experts warned that Persimmon is the first casualty, but it is almost certain to be followed by its big rivals.

Barratt yesterday denied rumours it is going to have to ask its shareholders for more money.

Last week, Taylor Wimpey said its sales are "significantly below" last year, and said it is "very cautious" about the market.

Stuart Law, chief executive of the property investment firm Assetz, said: "Persimmon is not the first and it will by no means be the last to announce a freeze on new starts."

The market showed signs of getting worse, not better, yesterday. Britannia, one of the country's biggest lenders, said it was raising all its two and three-year fixed rate mortgages by 0.75 percentage-points.

The new rates will add nearly £1,000 a year on to the cost of a typical £158,000 mortgage.

It is the second increase in a fortnight by the building society, which said it is having to continually review its mortgages as its rivals increase their rates.

The rise comes only a fortnight after the Bank of England cut the base rate by 0.25 percentage points, a reduction which few borrowers are benefiting from.

The rising cost of loans is also a blow to the Prime Minister, who has appealed for lenders to pass rate cuts on to borrowers.

On Monday, the Bank of England released £50billion to lenders hoping that this will help them through the credit crunch, but the rescue plan has had no impact. More than 75 per cent of the cheap deals have disappeared since last summer.

The number of homes sold and the number of mortgages taken out to buy a house have both collapsed by 50 per cent over the last 12 months.

Persimmon, which built nearly 16,000 homes last year, admitted in February that buyers were taking a "wait and see" approach.

But yesterday it acknowledged that the situation had got much worse since then. To persuade anybody to buy, it is having to offer big discounts and other incentives.

In its statement to the stock market, the York-based firm blamed the "unprecedented" mortgage drought.

Persimmon said: "Against the current backdrop, we have postponed the commencement of scheduled new sites until the mortgage market improves."

It will continue building homes which it has already started.

To add to the economic gloom, High Street sales fell by 0.4 per cent in March compared to February, despite "deep and widespread" discounts.

The figures from the Office of National Statistics confirm that stores are suffering because shoppers, squeezed by higher mortgages and rising food, transport, utility and council tax bills, are tightening their belts.