Lending leaps 55% at Northern Rock

NORTHERN Rock's mortgage lending surged by more than half in the first three months of the year but the bank said today that the market would cool in coming months.

House prices, which have risen by up to 16% in the past year, were likely to slow in coming months as further economic weakening lowers demand. A repeat of an early 1990s-style collapse appeared unlikely, however, with the bank predicting low interest rates will underpin more modest growth.

'In the medium term, signs of a modestly slowing economy may have an impact on housing demand but this should be offset by a combination of a shortage of new housing and historically-low interest rates,î it said.

Northern Rock's lending on residential property rose by about 55% in the first quarter of 2002 against the same three months last year, and the bank said it was on track to meet its target of securing between 7% and 8% of total mortgage lending this year.

Its mortgage book stands at more than £22.5bn. The lending surge means it should meet 2002 profit targets of between £310m and £342m.

Northern Rock starts the second quarter with £3.3bn of agreed business on its books, more than 50% up on last year. Its non-performing loans, counted as mortgages more than three months in arrears, are less than half the industry average figure of about 1.4%.