One of Britain's leading builders has warned uncertainty over interest rates is holding back the housing market.

But despite Berkeley Group's concerns, help is unlikely to come from the Bank of England next week due to Budget tax hikes.

The builder said sales are picking up but buyers need confidence mortgage rates will fall and the economy will stabilise.

A spokesman said: 'For this improvement to continue and sales rates to return closer to the levels of three years ago, there needs to be greater confidence in the trajectory of interest rate reductions and wider economic stability.' 

The comments came as official figures showed the economy contracted by 0.1 per cent in January – piling pressure on the Bank of England to cut interest rates next week following the reduction last month.

But analysts warned the rate-setting monetary policy committee (MPC) is unlikely to act before it sees the impact of the £25billion rise in National Insurance contributions in April.

The increase was part of a £40billion package of tax hikes announced by Rachel Reeves in the October Budget.

The Chancellor also announced a sharp rise in the minimum wage from next month – fuelling fears over inflation. Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said economic growth 'may have been similarly downbeat in February'.

He added: 'Despite these disappointing figures, a rate cut next week looks unlikely as rate setters will probably want to assess the impact of April's National Insurance hike on inflation.'

The Bank has cut rates three times since August last year, from their peak of 5.25 per cent to the current figure of 4.5 per cent.

But inflation has risen from the 2 per cent target to 3 per cent since Labour came to power – casting doubt over when the next rate cut will come. Financial markets expect another two cuts this year – taking rates down to 4 per cent – with the next move possibly coming in May.

Berkeley says it is on track to deliver £975m in profit over the next two years, expecting £525m in 2025 and £450m next year. The firm said it is 'hugely encouraged' by the Government's plans to build 1.5m homes by 2029.

But the builder warned regulatory changes such as the new building safety levy, to be paid by developers on new developments, place 'significant pressure on the delivery of new homes'.