Northern Rock bank shows solid profits

Banking group Northern Rock reports demands for mortgages are reaching record levels, and posted an 18.6% increase in annual profits.

Expectations of higher interest rates were doing little to slow down borrowing, with applications for loans in January running 20% ahead of last year, the group said.

Northern Rock offers both residential and commercial mortgages at about 10 mortgage centers in the Britain, and like many of its peers, Northern Rock converted from a building society, or mutual mortgage lender, in 1997.

The bank maintains that low levels of unemployment, limited new housing and few options apart from owner-occupation, would offset any slowdown in the housing market in 2004.

Northern Rock has a strategy of building strong lending growth from a lean cost base, said net lending rose 27.1% to £8.5bn (€12.35bn) in the year to December 31.

The proportion of lending to first-time buyers lowered to 23% from a level of 26% in 2002, the bank said.

The group posted pre-tax profits for the year of £386.8m (€561.54m), against £326.2m (€473.66m), a year ago.

Britain's housing market is expected to slow this year after property prices surged 15% in 2003, but the group expects the impact of this to be offset by higher levels of remortgaging.