NORTHERN ROCK has said that it hopes to create another 1,000 jobs in the next few years.

The bank said the posts were in addition to the planned creation of 1,900 jobs, announced last year.

The announcement follows preliminary results released yesterday that showed demand for mortgages had reached record levels.

The group posted an 18.6 per cent rise in annual profits - pre-tax profits for the year rose to £386.8m against £326.2m a year ago - and announced a dividend payout of 15.8p per share.

Expectations of higher interest rates were doing little to slow down borrowing, with applications for loans this month running 20 per cent ahead of last year, the group said.

Continuing low levels of unemployment, a restricted supply of new housing and few options apart from owner-occupation, would offset any slowdown in the housing market this year, it said.

Northern Rock said net lending rose 27.1 per cent to £8.5bn in the year to December 31.

Chief executive Adam Applegarth said: "We have delivered against all of our strategic targets and maintained our momentum as a growth story."

The extra capacity for job creation has come at the expense of part of the group's history.

David Baker, chief operating officer, said the group had applied for permission to demolish its tower block at Gosforth, the firm's first building, built in 1967, to make way for purpose-built space equipped with 1,000 extra work stations.

"This is an indication of the confidence we have in our business," he said.

Anthony Platts, of stockbrokers Wise Speke, said: "The housing market for 2004 is not expected to be as strong as 2003, but Northern Rock are confident that they can achieve continued growth in lending and of course assets under management. Costs as a proportion of income remain the lowest, by far, of all the UK banks and I see nothing in these results that would change my view that Northern Rock are worth holding."

A large number of customers at the time it converted to a bank in 1997 qualified for 500 free shares and the latest payout, due on May 28, will mean £79 to customers who have kept their shares - bringing the dividend payout for last year to £116.50 and the total since conversion to £543.50 per 500 shares.

From an original market value of £2,200, the shares are worth more than £3,500.

The strong profits also mean more money will go to the bank's charitable foundation, which receives five per cent of pre-tax profits