HSBC has introduced a staggering 1.99% mortgage for borrowers with a 40% deposit, undercutting the bank's standard variable rate by 1.95%.

The bank is looking to claim an even bigger share of the mortgage market with its new product and is already the largest lender in 2009 so far.

As the deposits required to qualify for a mortgage have risen (27% of products now require a 40% deposit), interest rates have been slow to come down. This new product could signal the start of trend.

Andrew Hagger of the financial website Moneynet said:

"It's an aggressive move from HSBC and may shake up what has become a rather stagnant mortgage market - we'll be watching closely to see how other lenders respond."

If there's a flood of applicants chasing the headline 1.99% deal, it will be interesting to see if HSBC can manage demand or whether the offer gets oversubscribed and then pulled within a couple of weeks."

The HSBC product has an arrangement fee of £1,199 and the rate lasts for two years.