HOUSEBUILDER Barratt Developments has announced record half-year profits, but predicted the overheated housing market will cool slightly this year.

The group, based in Newcastle, said demand for its housing had remained robust despite two interest rate increases by the Bank of England since November.

Barratt - the UK's biggest housebuilder - said it believed the market this year would stabilise as a result of further expected interest rate rises, with house prices rising more modestly.

It yesterday announced a 35 per cent rise in pre-tax profits to £142.6m in the six months to December 31 - continuing its 12-year unbroken record of growth.

Barratt completed 6,705 homes in the UK during the six months - up ten per cent on last year - at an average selling price of £161,700.

This helped boost turnover to £1.17bn - an increase of 24 per cent on the previous year.

Operating profits were £147.6m, up from £109.5m last time, while the interim dividend was up 40 per cent at 6.9p.

The company said that in the absence of unforeseen circumstances it would expect an increase of about 20 per cent in the total dividend for the year.

Chief executive David Pretty said: "Our sales are at record levels as we continue to experience good demand on all our developments right across the country.

"The housing market remains robust and is underpinned by low interest rates, good affordability, high employment levels and limited supply.

"These factors, together with the prospect of further modest interest rate increases, should help make the market more sustainable going forward."

Barratt said its landbank had increased to 46,645 plots, and said that 80 per cent of its homes were built on land which had already been used - exceeding Government regeneration targets. It is building 40 developments in the North-East and North Yorkshire, with prices ranging from £87,500 to £500,000.

Mr Pretty said: "Across the North, we have a range of developments which are well-located in areas of good demand and where there is a shortage of new housing, including York, Newcastle, Durham, Sunderland, Darlington, Consett, Middlesbrough, and Selby."