The Co-operative Bank has targeted first time buyers with a new product.

It has launched a 3.99% two-year fixed rate mortgage at 90% LTV.

The news has been welcomed by commentators.

“The Co-op Bank is putting its money where its ethical mouth is with the launch of its best-buy loan which carries no arrangement fee and a lower rate of 3.99% for borrowers,” said Michael Ossei, personal finance spokesperson at uSwitch.com.

“This move offers a significant cost saving, particularly to homeowners who can only muster a small deposit, and reinforces Co-op’s genuine commitment to delivering affordable options to those who really need it.

“The launch of a competitive two year fixed rate deal along with a 90% LTV indicates that the Government’s drive to get the banks lending again isn’t falling on deaf ears. It also suggests that, for the first time since the scheme launched back in August, the scales are beginning to tip in favour of the first time buyer market.

“This challenge by Co-op could throw down the gauntlet for other lenders to follow suit – but only time will tell.”