First Active has no plans to introduce a 3.99 per cent variable mortgage rate for its customers in response to the cheap mortgages being offered by the Bank of Scotland. Group chief executive, Mr John Smyth, said it doesn't intend to reduce its rates to that level. First Active is not getting "overly excited" by new entrants into the Irish market, he added.

Mr Smyth played down the likely influence of Bank of Scotland on the Irish market. Margins in new business mortgage lending are already very "tight" he said. First Active says it is confident the relationship it can build with customers through its branch network will be a significant factor in fending off the new competition from Bank of Scotland. Mr Smyth says it is still unclear whether Bank of Scotland's strategy is to "cherry pick" the best customers in the Irish market. First Active believes it can maintain its share of the mortgage market this year, claiming 15 per cent of all new mortgages written here. Mr Smyth said the quality of its mortgage book was extremely good and new business levels are strong.

Home loan advances during the first six months of 1999 represented, on average, 65 per cent of the value of the purchase price of the house. According to First Active some 52 per cent of home loans on its book in the Republic are for over £50,000, compared with 34 per cent in the UK. Mr Smyth said he expects continued growth in the Irish economy, albeit at a slower rate, and the emergence of a more stable housing market. "These factors, coupled with low interest rates, strong loan to value rations and the maintenance of prudent lending criteria will help to ensure that First Active continues to manage a profitable, high quality Irish loan portfolio," he said.