Australian giant to enter UK mortgage fray

Australia's biggest financial services company is making a bid to capture a sizeable share of the British mortgage market in a move that further ups the ante in the cut throat battle for home loan customers.

Commonwealth Bank of Australia, which boasts that 50% of the country's population has a relationship with it, launches in Britain next month with a range of Australian-style flexible mortgages. It has adopted the brand NewWorld and will sell its products via the internet, over the phone and later, through mortgage brokers.

The launch will be backed by a multi-million pound advertising campaign to laud the benefits of flexible mortgages.

Commonwealth Bank is setting its standard variable rate at 6.99% - compared with the typical British rate of 7.74% - and will be hoping to replicate the success it has had in Australia, where it has a 25% share of the mortgage market.

From November 30 it will be offering 11 products, including discounted, fixed, capped and buy-to-let deals. But, surprisingly, it will not provide so-called all-in-one mortgages combining a home loan and current account of the type pioneered in this country by Richard Branson's Virgin One and First Active.

All-in-one mortgages, hugely popular in Australia, allow people to offset money in their current account against their home loan, thereby reducing their interest payments.

But Adrian Cosenza, head of European banking for Commonwealth Bank, said: "We think it is a step too far right now for the UK consumer. Our research is suggesting they are finding that approach too complicated".

Instead the bank will focus on flexible mortgage features, such as the ability to make overpayments, daily rather than yearly interest calculation and "innovative Australian benefits" such as weekly payment options.

The Commonwealth Bank's arrival comes weeks after HSBC shook up the £115bn market by cutting its mortgage rate by almost one percentage point and the Halifax's new telephone bank Intelligent Finance announced competitive rates on home loans.

•Citing intense competition, Moody's, the ratings agency, said it was changing its outlook on Halifax's debt rating from stable to negative.