NatWest has introduced a five-year fixed rate mortgage at 2.95%, available up to a maximum LTV of 60%.

It is currently the lowest ever five-year fix offered in the UK, although its arrangement fee is well above average at £2,495.

Remortgages qualify for a free valuation and free legal fees.

Ray Boulger of John Charcol said: “A fee of £2,450 will instinctively put some people off, but to put it in perspective a £2,495 fee on a five-year fix is equivalent to the same annual amount over the deal period as a £999 fee on a two-year fix.

“Furthermore, the rate on nearly all two-year fixes and trackers (including NatWest’s) is higher than 2.95%. The larger a mortgage the better the value a borrower obtains by paying a high flat rate fee in exchange for a lower interest rate.

“NatWest is adopting a similar marketing strategy to the only other lenders with a sub 3% five-year fix – HSBC and Santander. All are offering a headline grabbing rate up to 60% LTV, coupled with a big fee, but a massive increase in the rate for the next LTV band, albeit with a much smaller free.

“The rate differentials for the higher LTVs are at least 1%, which is far higher than can possibly be justified by the small increase in the risk or regulatory capital requirements.”