Intelligent Finance steps up hostilities

Intelligent Finance, the Halifax's new internet and telephone bank, yesterday dramatically stepped up the online banking war by unveiling a portfolio of "market-leading" products and declaring that it aimed to sign up 1.6m customers in its first three years.

The flagship product is a current account paying 5% - higher than internet rivals such as Smile and First-e - and it has set its standard variable mortgage rate at 6.8%, almost a full percentage point lower than the Halifax's own 7.74% rate.

Intelligent Finance claims to offer customers potential savings running into thousands of pounds because of what it says is a "unique" system of connecting products such as current accounts and personal loans, giving people the ability to offset savings against borrowings.

As a result, some people whose savings outstrip their home loan will be able to enjoy a 0% mortgage, while others will pay no interest on their credit card or personal loan, said the bank.

The operation opens for telephone business on July 14 and for internet applications 10 days later.

It has decided on a two-stage launch following the technical problems experienced by Abbey National's internet offering Cahoot when it went live last month.

The Halifax is investing £120m over two years in the venture, including £10m on an advertising campaign.

The internet offshoot has described its target customers as 40-year-old "ABC1s" with families as opposed to twenty- and thirtysomethings, though it has adopted the Fatboy Slim dance hit Right Here, Right Now as the theme music to its forthcoming television commercials to fit in with its "futuristic, upbeat" image, said the chief executive of Intelligent Finance, Jim Spowart.

He described the 5% rate on credit balances it is paying on its current account as the best available for a "full service" account (including a cheque book) in Britain, but this may be contested by Cahoot, which on Friday raised the rates on its current account to 4.5%-6.5%. However, the Intelligent Finance rate beats that paid by Smile and First-e.

Some commentators were struck by the similarity of Intelligent Finance's initial mortgage offering to the flagship home loan offered by Standard Life Bank, of which Mr Spowart was chief executive until last autumn.

Intelligent Finance's deal is a flexible home loan with a 1.5% discount for the first six months, while Standard Life Bank's is a flexible home loan with a 1% discount for six months.

Other products include a savings account paying up to 6.25%, a credit card with a 10.8% annual percentage rate, and a personal loan rate of 10.5% APR.

Customers of Intelligent Finance will be able to do their banking by phone, internet or Wap mobile phone. It has announced that the first 150,000 customers to open a current account or take out a credit card will receive a free Wap phone.