The average cost of a two-year fixed rate loan has fallen to 4.41pc, down from 4.5pc in May and the lowest level since the beginning of the year, while the interest charged on a five-year deal has dropped to 5.41pc from 5.6pc, according to financial information group Moneyfacts.
The group said the reduction in mortgage rates was being driven by a fall in swap rates, upon which the deals are partially based, as the Bank of England's Monetary Policy Committee is expected to put off raising the base rate until the final quarter of this year.
But despite the imminent threat of an interest rate hike receding, many homeowners are still keen to fix their borrowing costs, and rising demand for fixed rate deals has helped to increase competition in the sector.
A flurry of lenders have slashed interest on their fixed rate mortgages during the past few days, including big names, such as Halifax, Nationwide, Lloyds TSB and NatWest.
There has also been a further improvement in the number of mortgages available to people with only small deposits, with 31 different loans now available for people with 5pc to put down, up from 24 at the start of the year and the highest level since December 2008.
Fact
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Choice for people with deposits of 10pc has also risen to 244 from 199 during the same period, while there are now 545 mortgages available for those borrowing 85pc of their home's value, compared with 480 at the start of the year.
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