Standard Life Bank has matched the 0.25 per cent cut in base rates which came only two days after the launch of its 'three-minute' mortgage.
The variable rate has been cut to 6.55 per cent from 6.8 per cent and comes into effect on January 11.
The new Freestyle mortgage has done £140m of business in its first three days.
Standard Life Bank managing director Jim Spowart says: "We have always committed ourselves to a promise that our interest rates would remain the amongst the most competitive in the market."
The bank claims to have taken 10,000 enquiries about the flexible mortgage in three days. They predict they will win a four per cent share of the UK mortgage market by the end of the year.