Britain's biggest mortgage lender HBOS has unveiled profits in line with investors' expectations, and offered reassuring news to homeowners fearing a house price crash.

The company said on Thursday that profits before taxes and one-off costs for the first six months of 2002 came in at £1.58bn ($2.2bn), 13% up on the same period last year.

HBOS' stronger bottom line partly reflects an increase in mortgage lending.

The bank said its share of the UK mortage market expanded to 31%, beating its own target of 25%.

City investors welcomed the news, marking BOS shares up 42.5 pence, or 7.5%, to 601.5p in mid-afternoon trade.

Property booms on

The bank's chief executive James Crosby said he expected house prices to continue growing at a moderate pace this year and next, underpinned by supply shortages and low unemployment.

"We expect growth in house prices through 2003, albeit at a much lower and more sustainable rate than seen in 2002 and 2002," he said.

There has been speculation in recent weeks that tumbling stock markets and deteriorating economic conditions could tip the UK's prolonged house price boom into a crash in the months ahead.

HBOS, created last year from a merger between Halifax and Bank of Scotland, has pledged to challenge the market dominance of the 'Big Four' UK retail banks - Barclays, Lloyds TSB, Royal Bank of Scotland/Nat West, and HSBC.

The bank issued £1.1bn's worth of new shares earlier this year in order to fund its expansion plans.