(Reuters) - Virgin Money (>> Virgin Money Holdings (UK) PLC) reported gross mortgage lending of 6.5 billion pounds ($8.6 billion) to the end of the third quarter, in line with a year earlier, and said it had seen robust customer demand due to low unemployment and a resilient housing market.

The British challenger bank said on Tuesday that credit card balances were 2.89 billion pounds at the end of September, up from 2.44 billion pounds at the end of 2016. The lender said it remains on course to meet a target of 3 billion pounds in card balances by the end of 2017.

Shares in Virgin Money were up 1.14 percent at 292.14 pence at 0703 GMT.

The bank, which listed on London's main market in 2014, said it expected its full-year CET1 ratio, a closely watched measure of balance sheet strength, to be around 13.5 percent.

Mortgage balances rose to 32.91 billion pounds at the end of September, from 29.74 billion pounds at the end of 2016.

Virgin now has around a 3.5 percent share of the British mortgage market, Bank of England data shows, highlighting the difficulties faced by British newcomers such as Virgin Money and Aldermore (>> Aldermore Group PLC) in challenging the established market grip of Barclays (>> Barclays), HSBC (>> HSBC Holdings), Lloyds Banking Group (>> Lloyds Banking Group), Santander UK (>> Banco Santander) and Royal Bank of Scotland (>> Royal Bank of Scotland Group).

There are also signs that housing market activity is slowing, with the number of mortgages approved for house purchase falling to 66,580 in August from 68,452 in July, according to Bank of England data.

Deposits at the bank increased to 30.03 billion pounds at the end of September, from 28.1 billion pounds at year end, Virgin Money said.

Consumer lending in Britain rebounded in August and rose by the largest amount in three months, Bank of England figures showed last month, shortly after Governor Mark Carney said banks had been lending too much.

($1 = 0.7548 pounds)

(Reporting by Noor Zainab Hussain in Bengaluru, editing by Anjuli Davies and Rachel Armstrong)