According to figures released by the bank yesterday, Standard Life Bank has lent over pounds 2bn for mortgages since launching with its Freestyle flexible mortgage in January. It initially set a target of pounds 1bn of mortgage business for its first year.
The bank yesterday revealed it has completed over 26,000 mortgages and approved more than 50,000. It now claims 11 to 12 per cent of the market.
The Freestyle mortgage is based on affordability rather than income levels. It uses a potential borrower's income and outgoings to assess suitability. Borrowers can also take two payment holidays a year and arrange to make larger monthly or one-off payments if their income stream is erratic.
Jim Spowart, Standard Life Bank's managing director, said: "We believe our success shows that banks do not have to offer loss-leading rates or gimmicks to attract customers."
The standard variable interest rate on its mortgage is 5.88 per cent with a discount for the first six months.
The competitive challenge of new entrants into the banking market, such as Standard Life Bank and Prudential's Egg, has raised the pressure on traditional mortgage banks such as Halifax, Woolwich and Abbey National.
Their market shares and margins have suffered as rival lenders offer keener rates and more flexible terms.
Halifax shares have fallen from 918p in April to 650p. Woolwich shares have fallen from 429.5p to 333p since June.
While the new entrants maintain that operating by telephone or internet banking help them to keep their costs low, allowing them to undercut their high street based rivals, they have been accused of offering loss-leading rates and widening their margins sharply and becoming less competitive after the inital headline grabbing rates.
Halifax's chief executive last month said that the competitive threat from to the more traditional banks would fade once they started reducing their discounts on interest rates.
Meanwhile, Standard Life Bank claims to have taken over pounds 3.4bn in savings from about 260,000 customers. It says customers prefer an "uncomplicated approach" to their personal finances.Reuse content