The bad bank behind failed lenders Northern Rock and Bradford & Bingley paid another £1.9 billion to taxpayers in the first half of the year and saw a sharp fall in soured loans.
UK Asset Resolution (UKAR), the state-owned firm responsible for winding down the mortgage books of the collapsed banks, said Government repayments surged more than 70% from £788 million a year earlier.
Its underlying pre-tax profits increased 10% to £529 million as the improving economy and housing market saw the number of borrowers in severe arrears drop 29%. Repossessions fell more than 8% to 3871 and charges for bad debts dived.
Chief executive Richard Banks said: "All that suggests that the economy is starting to improve and people's finances are starting to improve."
Britain's housing market has been stimulated in recent months by Government schemes that have boosted mortgage approvals and lifted prices.
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