One in five landlords is considering selling up after punitive changes to tax relief and stamp duty Credit: Gareth Fuller/PA

The rapidly shrinking buy-to-let market is driving lenders to a mortgage price war as they compete for dwindling demand from borrowers.

The Post Office is the latest lender to cut rates on a swathe of deals. Its new two-year fixed rate of 1.33pc is the lowest ever offered, according to Moneyfacts, the comparison site.

The lender now has the lowest interest rate in four of Moneyfacts seven categories and the joint lowest in another.

It follows similar moves by other lenders, including Nationwide Building Society, to sharply reduce rates.

Punitive tax relief and stamp duty measures introduced by former chancellor George Osborne have made the buy-to-let market less lucrative for landlords and levels of borrowing are falling. Industry figures reveal buy-to-let lending fell by 23pc over the past months, although some lenders, such as Nationwide, reported falls of more than 50pc year on year.

Some landlords are considering abandoning the market altogether, with one in five planning to sell up within the next five years, according to the Residential Landlord Association.