A continued rise in home sales in Scotland and the south of England was not enough to offset falling demand for new homes in the middle and north of England, FTSE-250 housebuilder Bellway reported yesterday.

The company reported a 4% drop in pre-tax profit to £96.9m for the six months to January 31, in line with expectations, but warned that the credit crunch was hitting supplies of mortgages, particularly to the key first-time buyer market.

Bellway sold 3252 homes over the period, down 12 on the year before. But in Scotland sales were up 15% to 440.

Finance director Alistair Leitch attributed the situation north of the border, where the company runs divisions out of Hamilton and Livingston, to a comparatively liberal planning system that allows more building of the sorts of two-storey detached homes he believes many homeowners want. In England the planning regime tends to favour higher density housing, he said.

"The market in Scotland is fairly resilient at the moment," he said. "That doesn't mean there won't be a downturn. That will inevitably come through but it is holding up better because of the product that is out there." In general, Bellway has seen a 20% drop in the sale of private homes between the summer and mid-March but it is increasing its sales of social housing to housing associations, bringing the overall drop to 9%.

The company has revised its target for full-year sales down to 5%-10% below the 7638 sold in 2006/07 but has secured sales or reservations for 88% of that revised figure.

Leitch said that the summer credit crunch, which restricted the amount of funding banks could get from the money markets, has reduced the supply of mortgages into the market, "quickening" the slowdown of a housing market.

"What has happened in 2007 has been a real sharp quick incision almost. In a normal cycle it would have slowed down to an extent. I have never known it like this and I have been with Bellway for more than 25 years."

The company is now offering vendors an average of £4700 in "soft incentives" such as part exchange with old homes, help with deposits or payment of stamp duty, up £700 on six months ago.

A major problem for Bellway, which operates at the more affordable end of the market, is the inability of first-time buyers to raise money to buy a home.

The group accounted for a quarter of Bellway's customers five years ago but this has fallen to 16% and Leitch is pessimistic about a resurgence as lenders increase the level of deposit they require from borrowers.

"If it doesn't change, the government will have to step in," Leitch said, indicating that it may have to increase the scope of its shared equity schemes.

The interim dividend was raised 10% to 18.1p.

The company's shares closed down 2.6% at 789p.