mortgage bank Northern Rock said the housing market remained robust and it expects lending to stay strong.

The Newcastle group said its record lending performance last year had continued in the first three months of this year, and should remain strong in the second quarter.

Chief executive Adam Applegarth said: "Operating performance in the first quarter of the year continues to be very good. It is in line with expectations and builds on the strong progress we made in 2001."

Residential lending is up more than 55 per cent compared with a year ago, and Northern Rock said it had a pipeline of agreed business of more than £3.3bn - 50 per cent higher than the same time last year.

Mortgage arrears continued to be tightly controlled, with the level of accounts more than three months in arrears at less than half the industry average.

The bank said: "The housing market remains both large and robust and the mortgage market, especially with the opportunity to remortgage at relatively low interest rates, is set to be sufficiently large for Northern Rock to achieve its lending targets."

It added: "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."

The update follows Northern Rock's upbeat results figures earlier this year when it reported an 18 per cent rise in profits and said it had more than doubled its share of the UK new mortgage market.

Northern Rock is due to announce its interim results in July. It was promoted to the FTSE 100 Index last year. Shares in the bank, which converted from a building society in 1997, went up a half point yesterday to 680.