Glasgow-based CYBG, which demerged from former owner National Australia Bank in 2016, said itS mortgage book swelled to £23.9 billion in the three months to the end of December, up 7.4% on an annual basis.
It said the mortgage market remained highly competitive, which has hit its net interest margins.
It added growth in home loans will slow, although it continues to expect a “mid-single digit” percentage increase for the full-year.
The bank, which has 2.8 million customers, believes that mortgage prices will also remain stable throughout the rest of its financial year in spite of intense competition.
Shares in CYBG fell 2% after the update.
David Duffy, chief executive of CYBG, said: “We have delivered another solid quarter of growth, despite a competitive operating environment, seeing continued momentum in both mortgage and SME lending.
“While the economic outlook remains uncertain we remain focused on delivering sustainable and prudent growth and are confident we will deliver our guidance for 2018 and the medium term.”
The group posted a 3.7% rise in current account and savings deposits over the first quarter to £28.7 billion - a 14.8% surge on an annual basis, helped by demand for its new digital app-based service B, which now boasts 150,000 customers.
Lending to small businesses lifted by a more muted 1.4% to £6.8 billion on an annualised basis.
CYBG had already cautioned over the outlook for the mortgage market at its full year results in November.
But it posted its first after-tax profit for more than five years, at £182 million for the 12 months to September 30 against losses of £164 million the previous year.
It is also targeting more than £100 million of cost savings by 2019 - a drive which saw the group announce plans in January to shut around a third of its branch network in 2017 and axe 400 jobs.