Irish financial institutions have long expected a foreign player to enter their patch, but most were taken aback by the low mortgage rate Bank of Scotland is prepared to offer to win custom.
Reacting to their newest competitor, the main banks and building societies were keen to play down the significance of the latest move, stressing the highly competitive environment in which they have always operated.
No big lender was prepared to state officially it would match the Bank of Scotland rate in the short term but most accepted they would have to do something - even for marketing reasons - to reassure consumers they have their best interests at heart.
Bank of Scotland is the first foreign institution to tap directly into the Irish market. As a leading player in the direct banking market in the UK, its telephone network is sufficiently developed to allow it to reach across borders to other markets for very little capital investment.
Its head of mortgages, Mr George White, says the bank has no specific targets in terms of the amount of business it expects to write in the Irish market over the next few years, but with such low overheads, the exercise is worthwhile, regardless of the number of customers it signs up.
The main challenge is to the institutions which rely heavily on mortgage lending, including the Irish Life & Permanent, First Active, the EBS and the Irish Nationwide. Irish Life & Permanent, the Republic's biggest mortgage lender, has said it has no fear of new competitors, stating it believes its products will stand up to any competition. Both it and EBS have pointed to the low introductory mortgage rates they offer and to the fact that borrowers can already lock into fixed rates of about 4 per cent for one year.
The main banks also voice a strong determination to protect their customer base against any foreign predators. AIB said it would "wait and see" how sustainable Bank of Scotland's mortgage rates would be.
Bank of Ireland said it was natural that a newcomer would want to make an impression in the market with such a low rate, but it would have to compete with all the financial institutions here.
The Irish financial institutions will closely monitor the activity Bank of Scotland generates when it opens for business on Monday.
If consumers opt for the cheaper rates on offer in sufficient numbers, the banks and building societies will quickly move to cut their rates to protect their market share.
Over the next few months, anyone shopping around for a mortgage will hear lots of reasons why they should think carefully before signing up with Bank of Scotland.
Some financial institutions were yesterday saying the cheaper mortgage product would not be very attractive to first-time buyers, for instance, as it is only available to individuals wishing to borrow 80 per cent of the total purchase price. Yet when the financial institutions are asked by the media about the average size of mortgages on their books and the typical mortgage being requested by new home-owners, they are quick to stress that Irish mortgages tend to be relatively low compared to current house prices.
Much will also be made of the reluctance of Irish financial institutions to repossess homes compared with the situation in the UK in the 1980s, and there will be warnings that the Bank of Scotland rate is an introductory offer that carries no guarantees. Whatever the marketing hype, consumers should be the beneficiaries of Bank of Scotland's arrival in the Republic. Domestic institutions will have to show they can be just as competitive as their overseas rivals when it comes to looking after customers - or else risk losing market share.
In turn, this may lead some of them to have to face further rationalisation in their cost structure or lower rates to some depositors if lower mortgage costs are not to lead to a fall in profitability.
