UK Asset Resolution (UKAR), the state-owned firm responsible for winding down the mortgage books of the collapsed banks, said repayments to the government had surged more than 70% from £788m a year earlier.

Its pre-tax profits increased 10% to £529m down to the improving economy and a drop in the number of mortgages in severe arrears. Repossessions fell more than 8% to 3,871 and charges for bad debts also fell.

Chief executive Richard Banks said: “All that suggests that the economy is starting to improve and people’s finances are starting to improve.”

He added there were “definite signs of a moderate recovery” and the mortgage market had been helped by the government’s Help to Buy scheme.

The report said UKAR has now repaid a total £6.6 bn to the government, but still owes another £42.1bn.