Yorkshire building society this week launched a mortgage with a market-leading rate of 0.78% – but the cost could go up if the Bank of England moves interest rates. The mortgage, which is available to borrowers with a deposit of 35% or more, will track the Bank base rate for two years, running at 0.68% above the official rate until the end of October 2023. The starting rate puts it ahead of other two-year deals, but unlike most of the other sub-1% home loans on the market it is not fixed, so borrowers are taking the risk that their repayments could increase. The Bank base rate has been at 0.1% since it was cut to an all time low as the coronavirus crisis first gripped the UK. But while several months ago economists were suggesting it could go into negative territory, the recent increase in inflation has led to predictions that rate rises could be on the horizon. At its last meeting the Bank voted to hold interest rates, but said that rising consumer prices had “strengthened [the] case” for a modest increase over the next few years. Yorkshire is also offering a tracker starting at 0.89% for borrowers with a 25% deposit. The deals, which both come with a £995 fee and a free standard valuation, are among a growing number on offer with rates below 1%, as lenders battle to attract customers, particularly those with large deposits. Ben Merritt, senior mortgage manager at Yorkshire building society, said: “In a really competitive mortgage market, we’re pleased to be able to offer our lowest ever mortgage rate to give borrowers more choice. “The recent increased availability of tracker mortgages, including the introduction of our first tracker mortgage for some years, expands the number of options available to borrowers who, in a low rate environment, may wish to take advantage of lower monthly payments.” However, Merritt added: “As with any variable mortgage that tracks the Bank’s base rate, it’s important to make sure any increase in monthly payments could be afforded, should the base rate rise.” The deals come with an early repayment charge in the first two years, equal to 1% of the loan being paid off. Eleanor Williams, finance expert at Moneyfacts.co.uk, said the 0.78% mortgage was “a welcome addition to an already bustling sector”, and showed that there was still an “interest rate war” between lenders. Mark Harris, chief executive of mortgage broker SPF Private Clients, said if the base rate went up to just 0.25% the mortgage would cost the same as the cheapest two-year fixed-rate deals on the market. “With analysts predicting that interest rates are only going to move one way, such a rise may be only the beginning and you could find yourself paying a lot more,” he said. Harris added: “With fixes and more flexible products still available at similar pricing, borrowers should think carefully about their needs and situation, particularly if they cannot afford to gamble on the future direction of interest rates.”