Housebuilder Bellway has said volumes are expected to dip this year and in 2024 as bosses cautioned over the potential further impact of cost-of-living pressures and higher interest rates.

Nevertheless, the FTSE 250 company told shareholders it reported a “sustained improvement” in demand over the spring, compared with a “challenging” end to last year.

The Newcastle-based firm, however, reported that the reservation rate for the four months to June 4 was down around a quarter, 24.9%, against the same period last year.

It added that it has accelerated the construction of social homes over the period, which has partially offset the dip in private demand.

Bellway said it is currently “on track” to deliver around 11,000 homes over the year to July with an average selling price of around £300,000, compared with 11,198 in the previous year and an average price of £314,399.

It expects volumes to be lower again in the next financial year due to a reduced order book, lower reservation rates and rises in interest rates, which struck 4.5% last month.

Jason Honeyman, group chief executive of Bellway, said: “While customer interest is currently healthy, the board remains mindful that cost of living pressures and the uncertain path of future interest rates could impact housing demand.

“Notwithstanding this, Bellway’s experienced teams, strong balance sheet and high quality land bank, position the group well to successfully navigate changing market conditions and continue to play an important role in increasing housing supply in the years ahead.”

The property group also revealed that the recent expiry of the Help-to-Buy scheme in England has led to “lower year-on-year demand from first-time buyers”.

Mark Crouch, analyst at eToro, said: “The period immediately after the pandemic was boom time for housebuilders but now they are struggling to drum up demand in the face of rising interest rates and a slowing housing market.

“That is reflected in Bellway’s latest trading update, which shows a significant fall in reservations, land investments and sale prices as well as a shrinking forward order book.

“The recent turmoil in the mortgage market is likely to cause further panic among would-be buyers, which will act as a further suppressor of demand.”