The Post Office has stepped up its attempt to become one of the UK's biggest mortgage lenders. It is thus offering a mortgage deal that requires just a 10% deposit.

The unusual thing about it is that, the deal is available on an "interest-only" basis as well as the normal "capital-and-interest" repayment method. It has been made so, so as to make it cheaper and easier for some borrowers to afford the initial repayments.

"This is a totally different approach from the rest of the market and will make their mortgages much more open to home buyers”, said Aaron Strutt of mortgage brokers Trinity Financial Group. "Virtually all lenders require mortgages over 75% loan to value (LTV) to be on a repayment-only basis - that's why the Post Office rates would be so different," he added.

The trial bases had though started in 2007, but recently in last October, it committed itself fully to the mortgage market.

The Post Office loans, which can be applied for by post, internet and phone or at its branches, are financed by the Bank of Ireland, with which the Post Office has a joint venture. The average deposit on a UK house purchase still stands at 25%, a level where it has been for a few years now.

However, the gentle easing of rationing in the mortgage market since the start of the year means there are now more than 160 deals available that asks for just a 10% deposit.

Whilst there are existing 90% deals available, many remain out of reach for most borrowers because the rates are too high.