Woolwich, the mortgage brand of Barclays, has launching a new one-year fixed-rate deal after the cost of wholesale funding fell to its lowest level for five years.

The sixth biggest mortgage lender is launching a new "fix and track" product tomorrow with a rate of 3.99 per cent for borrowers with a 40 per cent deposit, reverting after 12 months to a lifetime tracker rate of 1.99 over base, or currently 4.99 per cent.

The deal is also available with higher rates for howeowners with smaller deposits, or for those who do not want to pay fees.

The "Fix and track" product locks in borrowers for the first three years with an early redemption charge of 1 per cent of the mortgage.

Aaron Strutt, of Chase de Vere Mortgage Management, said: "This deal is the wrong way round. Borrowers want to take advantage of the falling base rate with trackers at the moment, they don't want to be fixed in. It doesn't make sense to customers, but it does protect Barclays from the threat of falling interest rates next year."

Lloyds TSB, Abbey and Alliance & Leicester have all launched new two and three-year fixes at rates at around 5 per cent in the last week as the cost of wholesale borrowing to fund fixed-rate lending continues to plummett. Today two-year swaps fell to 3.61 per cent, their lowest rate since July 2003.

The last time swaps were this low, a number of mortgage lenders were offering fixed-rate deals at around 3.4 per cent and experts predict that with swaps so low, fixes in the current market have further to fall.

Darren Cook, of Moneyfacts.co.uk, the financial website, said: "Fixed-rate are still overpriced at the moment. Fixes will continue to fall as swaps fall. Fixing on to a longer term deal with a lower rate would see borrowers through the recession and beyond."

Barclays also today relaunched its offset tracker mortgages, which allow people to use their savings to reduce the interest they pay on their loan. It is offering rates of 2.09 per cent above base rate for people with a 40 per cent deposit or 2.49 per cent above it for people with a 30 per cet one.

Barclays is yet to offer any new tracker products since they were withdrawn last week. It is also one of the last major lenders yet to confirm whether it is passing on the 1.5 per cent cut in interest rates to existing borrowers on variable rate deals.

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