The mortgage lender said pre-tax profits for the six months to June rose to �140m, a 5% increase on the same period last year.

The group said there were "early signs that the housing market may be beginning to cool".

But it added that while "price growth will slow" over the rest of the year, there would not be a sudden correction.

"We continue to believe that the fundamentals necessary for a sudden correction are not evident, and that a gradual slowdown is the most likely outcome," B&B said.

On track

The group said the market would gradually adjust thanks to historically low interest rates and high employment.

B&B added that its cost cutting drive was going well.

"The programme to cut �40m of core costs by the end of 2005 is on track, and the disposal of the non-core businesses is progressing well," said chief executive Steven Crawshaw.

In June the bank shed 450 back office staff and middle managers as part of the shake-up.

Earlier this year it announced plans to sell its estate agency operations along with its Charcol mortgage broking arm.