Home buyers are being offered the lowest-ever mortgage rate on the market – so cheap that it easily undercuts inflation.

Yorkshire Building Society has launched a two-year discounted standard variable rate product at just 0.89%.

The catch is that borrowers will require a 35% deposit and there is a pretty hefty £1,495 fee.

The actual rate on the mortgage works out at as a discount of 3.85% on the lender’s standard variable rate (SVR) of 4.74%.

This means the rate could change if the SVR is increased or decreased.

Yorkshire already offers a two-year fixed rate at 0.99% for a 40% deposit.

Rachel Springall, finance expert at comparison website Moneyfacts, said: “It’s fantastic to see such low rates on offer from Yorkshire Building Society and the choice between variable or fixed deal will appeal to different types of borrowers.

“Those looking for more flexibility over the shorter term may prefer a discounted deal, but those looking for some security could choose the fixed rate.”

Commentators expect the rate to kick off a new round in the mortgage price war, with another lender believed to be launching a new record-low deal on Wednesday this week.

However the best deals never last for long.

Atom Bank launched a record low five-year fixed rate of 1.29% on April 11 that only lasted nine days.