Mortgage lenders have launched a succession of low rates for borrowers with small deposits.

HSBC last week introduced a 3.49% five-year fixed price mortgage, with a £999 fee, but that has since been undercut by both Clydesdale and Yorkshire banks, which in response unveiled five-year fixed price deals at 3.39%, also with a £999 fee.

Brian Murphy, head of lending at the Mortgage Advice Bureau (MAB), told EYE that while the deals were competitive, some borrowers may in fact see loans with slightly higher rates as offering a better deal.

He said: “Mortgage products with high fees but potentially lower rates are not a new phenomenon.

“Lenders often offer a range of combination products, as different product features will appeal to different borrowers. Some are comfortable with high set-up fees to secure a lower monthly payment, particularly if this guarantees a low rate for as long as five years.

“However, others will want to minimise their upfront costs but are more comfortable with a slightly higher monthly repayment. This allows them to utilise their available funds for other household expenditure, which can be considerable – particularly when buying for the first time.

“As with most things in life, no one size fits all. A mortgage broker will ascertain what is important to each client and advise them accordingly based upon their individual preferences, needs and circumstances.”

Clydesdale and Yorkshire also released details of a two-year fixed rate deal for borrowers with a 10% deposit – at 2.39% with a £999 fee, available for both purchases and remortgages.

For first-time buyers with a 5% deposit, Clydesdale and Yorkshire also launched a three-year fixed deal at 4.49%, which comes with no fee, a free valuation and £250 cashback.

However, some first-time buyers may prefer the five-year fixed deal from Tesco, also priced at 4.49%, which comes with a £495 fee and no incentives but gives longer-term security against rate rises.