HSBC mortgage rates UK

The battle to slash mortgage rates to record lows has intensified - with a lender launching a deal at below 2% aimed at first-time buyers.

Yorkshire Building Society is offering people with just a 10% deposit saved a two-year fixed rate at 1.98%, with a £1, 345 product fee.

The rate is the lowest for this type of deal that financial information website Moneyfacts.co.uk has seen on its records, going back to 1988.

It comes in the same week that HSBC launched a mortgage with a rate below 1% - the first sub-1% fixed deal since Moneyfacts' records started.

Details of HSBC's new 2-year fixed-rate mortgage

Maximum loan size of £500, 000, overpayments of 10% of the mortgage balance a year allowed

Like the Yorkshire's new mortgage, HSBC's deal at 0.99% is also fixed for two years. But borrowers need a much heftier deposit of 35% to take out the HSBC deal, which carries a £1, 499 product fee.

Yorkshire Building Society is also offering a new five-year fixed-rate mortgage for borrowers with a 10% deposit, with a fixed rate at 2.93% and a £1, 345 product fee.

The great rate collapse

Many lenders have been offering their lowest mortgage rates ever in recent years, as the Bank of England base rate remains at its record 0.5% low.

Rachel Springall, a finance expert at Moneyfacts, said: "It's fantastic to see Yorkshire Building Society support first-time buyers by offering a competitively priced deal for those with a 10% deposit. It can be a great hardship trying to get on to the property ladder so finding a cost-effective deal to reduce monthly mortgage payments is essential.

"Borrowers must always work out the true cost on their mortgage deal and raise enough cash to cover all their upfront fees, such as legal costs or a product fee.

"In this low-rate market buyers should ideally be aiming to overpay on their mortgage whenever possible so that they can raise the equity in their home and reduce the term of the loan."