The gloom in the already crumbling housing market deepened today when builder Bellway reported a 45% fall in reservations of its homes.

It said weakening demand through June and July meant the slump in reservations was far worse than the 31% drop it reported two months ago.

Bellway blamed the freeze in mortgage lending and lack of confidence among buyers and said cancellations hit "unprecedented levels" over the summer.

It was yet further evidence of the devastation facing the housing market, which has seen prices tumble and thousands of building jobs disappear as workers are forced to down tools.

Bellway has already axed some 400 jobs. It today said it completed only 6556 sales in the 12 months to the end of July, 14.2% down on the 7638 it sold the previous year. The average selling price fell from £173,300 to £169,000.

"Bearing in mind market conditions, and the fact that the cancellation rate increased to unprecedented levels towards the end of the financial year, we consider this to be a satisfactory performance," it said.

"As we highlighted in June, restricted mortgage supply and a lack of consumer confidence had led to lower levels of activity. This situation continued throughout June and July resulting in reservations falling by around 45% for the second half of the year."

Mortgage lending has fallen by around two-thirds in the past year and many commentators are forecasting price falls of 30% from peak to trough.

Bellway said it was offering customers large incentives to buy homes in a bid to keep sales ticking over, hitting margins.

Bellway shares, which have lost three quarters of their value since April 2007, fell 10p to 566½p today. The sector has rallied in the past month but analysts say it has been overdone.

Of the reporting season for housebuilders, Dresdner Kleinwort's Alastair Stewart, one of the most bearish commentators, said: "We believe that it could be the grimmest for decades and investors should abandon the sector in advance."