Bradford & Bingley said it was on course to bank a six per cent rise in profits as the housing market remained busy.

The mortgage lender, which specialises in the buy-to-let market, said it was "comfortable" pretax profits would grow in line with City fore-casts from £310.1 million last year to £329.6 million.

The level of new business was "very healthy" and the outlook was good.

B&B said: "The fundamentals that support the housing market remain strong with demand for residential property expected to exceed supply for the foreseeable future.

"Unemployment and interest rates remain low and we expect these factors to remain favourable."

The bank, which is based in Bingley, West Yorkshire, said the buy-to-let market was in good shape with increasing job mobility, a growing number of households, and the rise in the student population all driving demand.

It added that business in the self-cert market - where borrowers declare how much they earn - was boosted by increasing numbers of people now self-employed.

"Our pipeline of new business remains robust at around record levels," said B&B in an update ahead of its first-half results.

It said new business volumes during the first half were at similar levels to the second half of 2005, when new residential lending hit a record £4.7 billion - up from £2.5 billion six months earlier.

B&B's update followed similar news from Halifax owner HBOS which also said it benefited from the strong housing market.

Earlier this week, industry surveys showed that mortgage lending enjoyed a particularly good month in May as the housing market recovered.

B&B - the UK's ninth largest bank - said its secured lending book remained strong and bad debts were in line with expectations, reflecting growth in its book and a stable secured credit environment.

But it also said the volume of claims for compensation related to endowment and investment products "increased markedly" following a downturn in the second half of last year.

It warned it may take another charge to cover liabilities related to the past mis-selling of endowment policies.

It said it was assessing if the rise, which follows a drop in claims in the second half of last year, was temporary or a new trend and would update investors at its half-year results in July.

The bank took a charge of £38.7 million in 2005 to cover liability for future claims, after a £37.1 million charge in 2004.

Endowment mortgages were popular in the late 1980s and early 1990s as homebuyers bought interest-only mortgages backed by stock market savings, but predicted returns failed to materialise, leaving buyers with big shortfalls.

Banks and insurers have subsequently faced compensation claims.

Steven Crawshaw, the building society's chief executive, said other banks were likely to have seen a similar jump in claims this year, following a drop in the second half of last year.

"Everybody's feeling there's a bit more life in the tail of this than we were all feeling at the end of last year," he said.

"We continue to stick our chin out and say we're plugging on pretty robustly, but it's an uncertain world and we don't want everyone getting over-excited on the first-half and then being disappointed at the full-year."

Shares closed down 12.5 at 446.5p.