Despite having a reputation as innovators less than half of lenders see challenger financial institutions as the catalyst for product innovation with the majority seeing price as the main market driver.

Research from Target Group suggested that 90% of lenders think we are still in the midst of a mortgage rate price war while just 45% of the lenders surveyed believe that challengers have sparked greater product innovation.

Ian Larkin, co-group chief executive at Target Group, said: “It will come as no surprise that lenders have seen competition intensify in recent years.

“The arrival of new specialist lenders has created an impetus for change when it comes to product design, customer engagement, underwriting and technology.

“This in turn has sparked price pressure that has not been slowed by Bank of England governor Mark Carney’s recent guidance on UK interest rates.

“Indicators point to competition increasing in the medium term.”