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Barratt Developments has reported a rise in annual pre-tax profits, but warned of a likely slowdown in the UK housing market over the coming months.

In a statement the country's third-biggest housebuilder by market value revealed that its pre-tax profits increased by 9.3 per cent, to £427.8 million, in the year to June 30th.

However the company, which acquired rival firm Wilson Bowden earlier this year, stressed that the impact of past interest rate rises was likely to result in a tightening of the housing market.

Barratt added that the ongoing global credit squeeze, which stems from rising default levels in the US sub-prime mortgage market, had further affected consumer sentiment. It said that pressure on lenders had also caused them to tighten lending criteria and mortgage availability.

"It is not yet clear how quickly the market will recover but we have to assume that there will be downward pressure on volumes and price inflation in the short-term," said Barratt chief executive Mark Clare.

"However, the market fundamentals remain strong with demand continuing to exceed supply," he added, stressing that the government was "intent on stimulating the sector by accelerating land availability".

Barratt is also confident that it can continue to compete effectively by maintaining sales and keeping costs down.

The company said that forward sales rose 67.3 per cent to a record £1.4 billion over the year to the end of June, increasing further to reach a level of £1.7 billion as at last week.

Company bosses have proposed a 17.5 per cent increase in the final dividend for the year, bringing it to 24.30p. The rise brings the total dividend for the year to 35.68p, up from 31.03p last year.