Yorkshire Building Society has launched the lowest ever mortgage rate – at 0.89pc.
To get the two-year mortgage home owners must have at least 65pc equity in their home.
However, it’s not a fixed rate, but instead a two-year 3.85pc discount to the Leeds-based building society’s standard variable rate (SVR), which is currently 4.74pc. This means the rate will rise if the SVR increases – leaving borrowers exposed to steep payment rises.
The mortgage also has large fees: a product fee of £1,495 and a fee of £90 payable on redemption of the mortgage. There is a 1pc exit charge if homeowners want to leave before the end of the two-year term.
James Farrow, of Yorkshire Building Society, said: "The cost of funding has fallen in recent weeks and as a financially strong building society with no external shareholders to satisfy we have the ability to pass this on to borrowers."
Charlotte Nelson, of MoneyFacts, the comparison service, said the new launch shows that “there is definitely still fire in the mortgage market”.
However, she said the appeal of the deal would be limited.
"With a sizeable deposit required this will limited the amount of borrowers who will be able to access this deal,” she said.
“While the competition is high generally, sadly many lenders' focus is too often at the part of the market with a high proportion of equity . It's a blow to those who are often considered the life blood of the mortgage market.”
Borrowers should also be wary of the high fees on the mortgage, warned Ms Nelson.
"As with many low mortgage rates on the market this deal is compensated by a large fee of £1,495 so borrowers considering this as an option will have to look at the true cost to ensure this is the right offer for them.”
If you work out the true cost, due to the large fee someone borrowing £150,000 would be £1,015.94 better off opting for a deal with a higher rate but no fee, according to figures from MoneyFacts.
Yorkshire's rate for someone in this scenario would cost £8,189.48 for the first year, compared to £7,819.52 for the building society's higher rate product at 1.05pc, but which has a lower fee of £995.
Cheaper still is the fee-free mortgage from Monmouthshire Building Society, which has a rate of 1.47pc for two years, no fees and would cost £7,173.51 in the first year.
Individuals may also be put off by the fact that the rate is not fixed, Ms Nelson added.
The launch comes after Atom Bank withdrew the cheapest-ever five-year deal, at 1.29pc, after just nine days.