Established in Edinburgh in 1695, Bank of Scotland is the oldest clearing bank in Britain and has a reputation for solidity. One British banking analyst describes it as having the best loan/loss history of all the British commercial banks, partly because of its exposure to the Scottish market which did not suffer as much as other parts of Britain in the last property downturn.

The bank owns Equity Bank in the Republic and is believed to be among the bidders for ICC Bank. It also has a growing presence in Australia where it owns the Bank of Western Australia.

Not afraid of making bold strategic moves where it sees potential rewards, the only recent blot on its copy book was the agreement signed with right-wing US evangelist Dr Pat Robertson, from which it was forced to extricate itself at considerable cost.

What sort of record does it have in the British market?

With a market capitalisation of €15 billion (£11.8 billion), the bank is bigger than both AIB and Bank of Ireland. Nonetheless, it is small in British terms, enjoying a market share of around four per cent of the total British loan market while its mortgage share is probably closer to 3 per cent.

However, Bank of Scotland has a strong track record in online and telephone banking which allows it to keep costs down.

As a result, it also has a reputation for being near the bottom of the British league table in terms of the mortgage rates it offers.

What exactly is it offering Irish borrowers?

The bank is offering a variable mortgage rate of 3.99 per cent (APR 4.1 per cent) well below the EBS rate of 4.85 per cent (4.9 per cent) the lowest previously on offer in the Irish market.

It is targeting both new and existing borrowers. However, the bank will only lend up to 80 per cent of the value of the property purchased.

On the plus side, it will allow lenders to top up their loan to cover costs associated with buying a house such as legal fees and stamp duty.

Is this just a loss-leader to entice people before rates revert to the levels prevailing elsewhere in the Irish market?

Irish lenders would like to think that this is the case. But, many observers of the Irish mortgage market believe that Bank of Scotland's rate simply proves that the domestic banks and building societies, which are currently enjoying margins of more than two percentage points between the rate at which they raise money and the charge they make to borrowers, have been overcharging for years.

Analysts point out that the average margin enjoyed by banks in Britain is between one and one and a quarter percentage points while in the US, banks have long been used to even tighter margins of between half and three-quarters of a point.

"This is a profitable business for Bank of Scotland. It's misinformed to assume it's loss leading," says Mr Jonathan Morris, European banking analyst with Dresdner Kleinwort Benson in London.

He points out that new entrants to the British home loans market are accepting margins of less than one percentage point compared with the one and a half of a percentage point Bank of Scotland can make on its Irish offering.

"I would be pretty frightened if I was an incumbent. Bank of Scotland has the size and capital and the market it is moving into is more profitable than the market it is already in."

What's the downside with Bank of Scotland's mortgage offering?

Bank of Scotland appears to have adopted conservative lending criteria so many borrowers will not qualify for its mortgages, leading to accusations that it is just out to cherry-pick the best customers in the Irish market.

It will lend just 2.5 times salary plus the second income in cases where there are two earners.

Its stipulation that it will only lend up to 80 per cent of the value of the property purchased will also effectively exclude many first-time buyers.

In addition, it is offering a single variable rate product so at present, it will not suit those who want the option of switching to a fixed rate.

Finally, mortgage advisers caution that it has offered no guarantees that it will remain the lowest provider in the market.

While its low-cost structure and its ability to live with far tighter margins than those prevailing in the Irish market suggest it should remain competitive, borrowers can only wait and see.

How do borrowers go about changing mortgage lenders?

If you're stuck with a variable rate of 5.25 per cent on your loan, you are paying £69.00 more per month on a 20-year £100,000 mortgage than a Bank of Scotland borrower would pay.

But how can you escape your existing situation?

Switching your loan from one institution to another is a lot less painful than many people realise, according to Mr Richard Eberle of Rea Mortgages.

For those on variable rates, it costs between £800 and £1,000 on average.

Borrowers have to pay a solicitor to handle the legal side of the business, typically at a cost of £400 to £500. In addition, home owners face a land registration fee of £250 to register the new loan; stamp duty on the mortgage, calculated at 1/10th of a percentage point and valuation costs.

What costs are involved if you are on a fixed rate?

While switching lenders is relatively simple for those on variable rates, those on fixed rates will find it more difficult as the penalties involved in breaking a fixed interest rate contract can be high. The charges imposed vary from lender to lender but most of them tend to charge between three and six months' interest or they charge borrowers for the costs they will incur in continuing to service the fixed contract. Usually, the penalties are substantial and borrowers are advised to do their sums carefully before breaking their contracts to ensure it's financially worthwhile.

Should you consider switching?

Those eager to avail of Bank of Scotland's lower rate should make sure they do their sums so the savings involved in switching outweigh the costs involved.

But most observers agree that it's early days yet and many existing borrowers may decide to wait for a while and see how things pan out.

However, that does not mean you should remain inactive and now may be the time to pop in for a chat with your friendly mortgage lender for a frank discussion as to why it is charging so much more for home loans.

"The real benefit of this is that it will force other players to sharpen their pencils," says Mr Eberle.

Don't be afraid to give them a nudge in the right direction.