Alliance & Leicester has launched a new two-year tracker mortgage today, with an interest rate of 5.98 per cent.

The bank says the fully flexible loan will allow customers to repay in lump sums or overpay to build up credit and later borrow money back.

Head of mortgage products Richard Taylor said the deal "demonstrates Alliance & Leicester's commitment to the mortgage market", adding: "With both flexible features and a headline rate below six per cent, it represents a great deal for … customers - particularly as fixed-rate pricing continues to rise across the market."

The mortgage is available to new and existing customers and after two years will track the Bank of England's base rate, which is currently at five per cent, plus 1.49 per cent.

Already this week Bradford & Bingley, First Direct and the Co-operative Bank have all raised interest on their fixed-rate mortgages.

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