mortgage bank Northern Rock has refused to change its targets for the year, despite seeing further evidence of a slowdown in the housing market.

In a trading update, the group said it was pleased that its pipeline of agreed new business remained consistent with the start of the year.

Northern also said it was comfortable with market expectations for annual profits of about £475m, a gain of ten per cent on a year earlier and within the company's targeted range of between ten and 20 per cent.

The improved performance came despite the company forecasting a fall in the overall mortgage market, which it expected to decline to £260bn in this year, down from the record £291bn seen last year.

The £260bn forecast is slightly lower than the range of £265bn to £270bn predicted by the bank at the start of the year.

However, Northern said the lower figure, reflecting higher mortgage costs and a slowdown in consumer spending, was still sufficient for it to meet lending targets.

The company said it was starting the second quarter of the year with agreed loan business of £5bn, seven per cent higher than a year earlier and broadly in line with the £5.1bn seen at the start of the year.

The residential lending pipeline of £4.5bn represents a gain of six per cent on a year earlier and contrasts with a 17 per cent fall in gross awards for the industry. Strong customer retention ensured net lending rose 54 per cent on a year ago, which was Northern's quietest quarter last year.

Northern said there had been no deterioration in credit quality, with residential arrears of more than three months being half the industry average.

In January, Northern announced pre-tax profits of £431.2m, a new record after beating the £386.8m reported a year ago