The man at the top of one of the region’s most prolific house-builders said he doesn’t fear rising inflation – but mortgage availability remains his principle concern.

Dominic Harman, managing director of Persimmon in the West Midlands, said the 3.7 increase in the cost of living revealed this month could actually benefit house sales, as buyers are keen to see a return on their investment, despite accepting interest rates will rise.

However, he said the mortgage market remains a constraint on growth, and fears the billions set to be paid back to the Government by banks could worsen the situation later in the year.

Mr Harman said: “We know that interest rates will rise at some point. It is something that we have got to take.

“We do need a bit of inflation in house prices to build confidence because people need to feel that they are going to buy a house and the price will at least stay the same, or increase in value.”

He added: “Mortgages are still the single biggest factor affecting people wanting to buy.

“If you look back over any decade, an average of about 160,000 home a year are usually built. Last year there was 80,000 built.

“There was a shortfall anyway and there is now a massive shortfall. The demand is there but our customers have still not got reasonable access to finance.

“It was very difficult last year and it is very difficult this year and now the banks have got to start to pay back their loans to the Government and they may restrain it more.”

The consumer price index climbed to 3.7 per cent in December, leading many experts to predict a rise in interest rates in the short term.

Despite the conditions, Mr Harman said sales were comparable to last year, without the added impetus of Government assistance.

He said: “The year started well. Visitors to the developments are up and the sales are up when you compare with the first three weeks of last year.

“We do quite a bit of part-exchange. That is our window to the second-hand market and we are doing more of that because we are confident that the market has reached its stabilisation point.

“We had to re-plan some of our developments and we had a real focus to change our mix from what the planners wanted us to build to what our customers wanted – family homes.

“We went to a large proportion of two-bedroom and three-bedroom houses with two stories.

“We have re-planned all of our developments across the board. We still have some apartment schemes but every one has been looked at.”

Persimmon is set to submit final plans for a major housing development in Perry Common to the city council.

The company has a six-year land bank and also has an agreement with Midland firm St Modwen to develop housing on mixed-use sites, including the former Goodyear factory site in Wolverhampton and Longbridge.