£603m in Irish home loans granted by Bank of Scotland

Bank of Scotland, which offers the lowest variable mortgage rate in the Irish market, has approved £630 million (€799 million) in home loans since it opened for business last August.

The bank has refused to disclose how much of the £630 million was drawn down in new mortgages but insists it is attracting good quality business away from Irish institutions.

Bank of Scotland is offering a mortgage rate of 3.69 per cent - some 1 per cent below the rates available at Irish banks and building societies - and has pledged that its rates will not rise more than 1.5 percentage points above European base rates.

Its director of direct mortgages, Mr Ronnie MacAulay, said more than two-thirds of its Irish business is coming from homeowners who are switching their mortgage to the bank to avail of its lower interest rates. A further one-third of its book includes customers who are taking out mortgages on new properties. First-time buyers do not account for any significant element of its book, mainly because it will only provide a loan equivalent to 80 per cent of the value of their home.

The average mortgage being approved is £72,000 and the average terms of that mortgage is for 17 years. Mr MacAulay says the value of the average loan compared to the market value of the home is around 47 per cent.

Last week, the EBS Building Society, issued a strong warning about the state of the Irish mortgage market. Its chief executive, Mr Pat O'Reilly, raised concerns about the high level of indebtedness within the economy and the exclusion of young people from the property market due to spiralling prices.

The breakdown of Bank of Scotland's Irish business would suggest it has managed to gain market share by cherry-picking the best quality business from its Irish rivals and is not overly exposed to any sudden downturn here.

It is difficult to measure the impact Bank of Scotland has had in the Irish mortgage market without details of the amount of loans drawn down by its Irish customers. Not all of the £630 million will have been taken up as certain customers may have used the approval to negotiate better terms at their own financial institutions.

Mr MacAulay would not make any projections about the level of business the bank expects to write here this year but most analysts suggest that the recent 0.25 of a percentage point rise in official interest rates may accelerate its growth here.

Bank of Scotland is currently embroiled in a bidding battle to take over the UK National Westminster Bank, which owns Ulster Bank. If it is successful in gaining control of NatWest, Bank of Scotland has stated it will sell Ulster Bank