Mortgage bank Northern Rock yesterday raised its annual growth target after seeing half-year profits improve by more than 14 per cent to £273.7 million.
The Newcastle-based company said it enjoyed a good first half of the year, adding it had also put in place "key building blocks" for the long-term, including the introduction of new IT systems.
It is now looking for growth in underlying profits of 20 per cent - give or take five per cent - after previously working to a figure of 15 per cent.
Northern said it was likely to take a couple of years to achieve the centre of the range, meaning it was comfortable with average market forecasts for a rise of 15 per cent to £355 million this year.
Northern again achieved record levels of lending in the first half, with gross lending up 28.3 per cent at £14.8 billion. As well as a recovery in the housing market, Northern has benefited from a surge in demand for remortgaging.
It said prospects for the rest of the year appeared healthy, although it added there was likely to be a slight deterioration in credit risk across the sector as unemployment crept up and energy costs rose.
Northern said the number of mortgage accounts three months or more in arrears continued to be below half the industry average, at 0.45 per cent at the end of June.
Deputy chief executive David Baker said: "We expect arrears to reflect tightening economic conditions so we might see a gentle drift up. But nothing alarming and nothing that will trouble lenders."
Northern said its share of net UK mortgage lending of 14.3 per cent was similar to levels seen in 2005.