Two-year fixed rates hit seven-year low

Moneyfacts.co.uk figures show that the average rate in September 2003 was 4.51%.

Three-year fixed rates now average 4.16%, their lowest point since May 2009, while five-year fixed rate mortgages are at an average of 5.61%, their lowest level since June last year.

Moneyfacts.co.uk said interest rates on fixed deals have fallen significantly since September 2009 as lenders attempt to attract borrowers who are choosing to remain on record low standard variable rates (SVRs) and overpay their mortgage.

Michelle Slade, spokesperson for Moneyfacts.co.uk, said: "A fifth of lenders have moved to increase their SVR since Bank rate was kept on hold after finding their previous level unsustainable.

"Competition for a limited amount of mortgage business continues to increase amongst lenders, which are once again actively competing to be top of best buy tables."

She added that previously it was only mortgages for borrowers with large deposits that had seen cuts, but as the market has improved those with smaller deposits are beginning to see more competitive deals.

Slade said: "The platform has been set for the mortgage market to return to some sort of normality, while still applying the lessons learnt over the last few years."