Northern Rock, the state-owned mortgage lender, is to cut the cost of its popular mortgage deals for the fourth time in a fortnight as part of an "aggressive" new drive to take a larger share of the UK market.

From Monday, it is reducing fixed-rate deals by up to 0.64 percentage points. A competitive new two-year fix will be available at 3.65 per cent for those needing to borrow up to 70 per cent of a property's value, with a £595 fee.

The Rock is also introducing deals for borrowers with smaller deposits, including a fixed-rate for two years at 5.39 per cent, on loans worth up to 80 per cent of a property's value. The deal has a £595 fee. It plans to widen the availability of its 80 per cent loan-to-value deals to its branches and online, as well as registered mortgage brokers.

David Hollingworth, of London & Country Mortgages, the broker, said: "These new deals are extremely competitive, proving that Northern Rock is really driving the market at the moment.

"Barclays made cuts to its mortgage deals earlier this week and Northern Rock have come back and undercut it again. It is very aggressive pricing and is designed to achieve the kind of lending targets that Northern Rock set itself in the middle of the year."

The bank has committed to lend £2.7 billion to new and existing customers in the last half of the year, up from £1.3 billion in the six months to June 2009.

Earlier this year it announced plans to boost the struggling UK mortgage market with £14 billion of new lending and in August said it would lend a total of £4 billion in 2009. It is now offering retention deals to existing customers as well as competitive deals to new borrowers.

Last week, Northern Rock cut rates by up to 0.4 percentage points on a number of fixed-rate and tracker home loans.

Lloyd Cochrane, head of Mortgage Products, said: "As these further rate reductions show, we continue working hard to offer a new mortgage proposition that meets the needs of both homebuyers and borrowers looking to remortgage."

Mortgage brokers welcomed signs that competition is returning to the mortgage market as other lenders introduce more competitive deals.

Earlier this week Woolwich, the mortgage brand of Barclays, cut the cost of two, three and five year fixed rates by up to 0.6 percentage points. A three-year fix for borrowers needing up to 85 per cent of a property's value has fallen to 6.39 per cent from 6.99 per cent, with a £999 fee. The move cuts the cost of a £100,000 interest-only loan by £74 a month.

Leeds Building Society today launched a new loan available up to 85 per cent of a property's value with a competitive rate of 5.75 per cent. Abbey and Alliance & Leicester have also reduced the cost of some deals and are launching new deals on Monday.

Plans to slice Northern Rock into good and bad assets have been delayed by two months, even though the European Commission is on the brink of approving the break-up and private sale of the lender.

The Treasury had hoped to carve up the bank by the end of October in a move that would have enabled it to compile formal sale documents and to secure a buyer before the General Election next year.