The rate on the five-year mortgage, which is available up to a maximum 75% loan-to-value (LTV)is below that of competitor, Chelsea Building Society, which offers a rate of 3.09%. Like Chelsea, however, it also requires a £1,495 arrangement fee. Two other 60% LTV products are available.

A Moneyfacts spokeswoman said: “It is market-leading rate at the LTV and it beats its rivals but people need to take into account the overall cost of the mortgage. You need to raise that initial deposit, you need to raise that fee and you need to take care of other fees as well, like valuation fees.”

The fixed rate products are available to movers, remortgage customers or first-time buyers with a larger deposit. Of the two 60% LTV products, the three-year fixed rate product has an interest rate of 3.19% while the five-year fixed rate has an interest rate of 3.25%.

Post Office Mortgages head John Willcock said: “We constantly review our mortgage range to ensure our customers receive the best possible value along with great service. A five year mortgage under 3% is extremely good value, and many of the best competitor offers, recently introduced, require a further 15% deposit and £2,000 fee.

“We are also aware that customers who want a smaller loan can be put off by paying arrangement fees, so we have expanded our comprehensive no-fee range.”

The decision by the Post Office to drop the rate below 3% comes two months after First Direct introduced a five year fixed rate 65% LTV mortgage at 2.99%.