DEMAND for new homes remains strong, according to Britain's largest housing firm.

Persimmon recorded a 29 per cent increase in first-half profits during the six months to June 30.

Pre-tax profits rose to £151.7m from £117.2m last year - a record increase for any six-month period in Persimmon's history. Turnover rose five per cent to £857.2m.

The signs are good for the coming months, with plenty of interest in properties of all types.

Despite some analysts predicting interest rates will rise, Jeff Fairburn, managing director of Persimmon Homes North East, said the country was a long way from a return to crippling interest rates hovering in the mid-teens.

"Everybody has got a concern about the levels of borrowing going on, in terms of multiples of earnings. That has got to be viewed with some caution," he said.

"But most people, particularly in the North-East, are buying sensibly. I think the borrowing is under control. It would take quite a big shift in interest rates to start to affect the market.

"People might be more cautious, but it will not have a significant effect on the market or the prices."

Persimmon's northern region saw the strongest price increases, where the average selling price was £125,956 - 22 per cent higher than last year.

In the south, where house price growth has been slowing, Persimmon said the average selling price of a home was £163,749, up 14 per cent on the same period last year.

Premium brand Charles Church also reported good progress in the half, with 460 homes completed and higher operating margins than last year. The average selling price fell slightly to £242,333.

The company has booked sales of £840m for the second half of this year, while its land bank - land awaiting development - is now more than 56,000 plots.