Housebuilder Bellway has today said its profit margins were being hit as it cut property prices by an average £10,000 to help cash-strapped homebuyers.

The Newcastle based housebuilder said it had resorted to knocking around 6 per cent off the average price in the final two months of its financial year to secure sales. It has also offered other incentives, such as including curtains and carpets within the asking price.

Bellway added more gloom to the housing market as it announced that reservations had fallen by around 45 per cent for the second half of the financial year compared to the same period in 2007.

It said efforts to drum up demand were likely to see full-year operating margins drop by up to 3 per cent against last year's 18.7 per cent.

Bellway reported that completed sales had fallen by 14.2 per cent from the previous year as lenders restricted finance to homebuyers.

However falls in the average selling price were limited to a drop of 2.4 per cent - to £169,000 – due to its strength in the housing association market.

The house builder said it is "fully focused" on cutting costs.

The group recently made 150 staff redundant as it merged offices and closed four sites - in Scotland, the South West, Midlands and Thames Gateway.