The Prudential's Internet banking service, Egg, has cut its ordinary mortgage rate to 5.59%, the lowest standard variable rate at present.

Users can apply online for the new rate, even though Egg's full Internet home loan service will not be launched until next year.

It comes on the back of the success of similar schemes, suggesting a major change in the way the home loans market operates.

Mortgage 'revolution'

Standard Life, is now lending 15% of all new mortgages after offering a cut-price 5.9% rate on its telephone-only service.

Home buyers can also apply for the Egg rate by telephone, but will be subject to a £199 fee.

Trevor Field, head of home finance products at Egg, said: "We are currently looking to do in the region of £1.5bn net lending this year.

"In terms of saving both time and money, we think the Internet will revolutionise the mortgage marketplace in the UK".

Woolwich Direct, the telephone arm of the Woolwich bank, said it was launching two new mortgages, at 6.79% fixed for five years, and at a 1.5% discount for two years to its standard rate, making it currently 5.34%.