The new five-year fix comes after Santander and Skipton Building Society joined the fight to attract new borrowers.

The Times reported that Santander has launched a 1.5% five-year fix for borrowers with a 40% deposit which costs £999.

However, Skipton Building Society has released an even cheaper deal, at 1.45% with the same deposit and a £1,495 fee. Both deals, available via brokers, are open to new buyers and remortgagers alike.

Andrew Montlake, director of mortgage broker Coreco, said: “Such low rates are an extremely rare occurrence in the five-year fixed-rate market and will make anyone who has put off remortgaging or buying sit up and take notice. These latest reductions make a huge statement in the interest-rate war that has been raging between lenders for some time.”

Today, the average five-year fixed-rate mortgage costs 2.11% for borrowers with a 40% deposit, compared with 2.31% a year ago, data shows. For those with a 5% deposit, the difference is even bigger as they can fix for five years for 3.6%, compared with 4% a year ago, according to Moneyfacts.

Darren Cook, finance expert at Moneyfacts, said: “Competition in the five-year fixed-rate mortgage sector is pushing rates closer towards more traditional two-year fixed rates. Borrowers should remember to consider the potential costs of being tied into a mortgage, such as exit fees, should they wish to shop around during the period of the fixed rate.”