Standard Life Bank is refusing to enter a price war with its arch rival egg and is increasing the cost of its Freestyle mortgage.
The Edinburgh-based bank is withdrawing its 1.33 per cent six month discount on its Freestyle flexible mortgage and replacing it with a 0.89 per cent discount off its current standard variable rate of 5.88 per cent.
The move comes one week after Egg, the direct banking arm of Prudential cut its standard variable rate by 0.2 per cent to 5.59 per cent.
Standard Life Bank managing director Jim Spowart says he remains totally committed to never offering loss-leading rates to compete for market share. He also believes the bank is on track to take a 15 per cent share of new lending after entering the market in January this year with the initial goal of completing £1bn in applications.
Despite Spowart's claim, Standard Life Bank's variable rate is significantly lower than traditional high street leader Halifax's 6.85 per cent, Abbey National's 6.75 per cent and Nationwide Building Society's 6.45 per cent.
Managing director Jim Spowart says: "Our stance since launch has been to avoid the loss-leading rates by some of the other players in the marketplace.
"This marginal reduction in our discount rate now will allow us to keep our rates as one of the most competitive in the marketplace."