mortgage lender Northern Rock has hailed its half-year figures as great news for the North-East as it stuck by profits forecasts despite being braced for a slowdown in the housing market.

The Tyneside-based company, which has an estimated 8.4 per cent share of the UK mortgage market, said continued strong demand for remortgaging would offset the impact of rising interest rates and enable it to meet growth targets.

The comments came as the bank announced a half-yearly 14 per cent rise in under-lying profits to £200.3m, and a donation of £10m to charities in the North-East and Cumbria through the Northern Rock Foundation.

Northern Rock set up the charitable foundation to receive five per cent of pre-tax profits when it converted from a building society in 1997.

So far it has provided more than £100m for distribution to worthy causes.

This year, the foundation has already issued grants totalling more than £11.775m, more than for all of 2001.

Its figures for the six months to June 30 show Northern Rock has achieved a 30 per cent rise in total net lending to £5.1bn.

Chief executive Adam Applegarth described the half-year figures as encouraging while chief operating officer David Baker hailed them as great news for the North-East.

Mr Baker said: "We are embedded in the North-East, we are committed to the region, and this is great news that the company is growing and creating jobs for people. We are very proud of that."

Mr Applegarth said: "The house purchase market should continue to slow, but remortgage activity will remain buoyant.

"We expect, with that background, to continue to achieve the volumes of lending we require to reach our strategic growth targets."

The company also pointed out that the housing market was still in a healthy condition, helped by low interest rates, low unemployment and a restricted supply of new housing stock.

Shareholders will receive an interim dividend of 8.5p a share, an increase of 13.3 per cent on a year earlier.

Mr Applegarth said the company was comfortable with forecasts for the year, which are for profits of about £429m, a gain of 12.4 per cent.

James Rainbow, director and investment manager at stockbroker Wise Speke, described the half-year figures as a solid set of results.

He said: "The mortgage market will slow this year but, given the bank's efficiencies and assuming interest rates don't rise too far, too quickly, there is good reason to believe a ten per cent-plus increase in profits for the full year."