House market hope as fixed rate interest falls

The average cost of a two-year loan dropped to 3.88 per cent during the month, down from 3.97 per cent in January, to stand at its lowest level since July 2003, according to the Bank of England.

There was also a fall in the average cost of a five-year fixed rate mortgage, with this dropping to 5.49 per cent from 5.56 per cent, while tracker rates increased slightly to 3.69 per cent, although they remained at their second lowest level since records began in 1997.

A number of banks and building societies cut their rates during February, with many launching new best-buy deals in a bid to tempt borrowers to remortgage away from their lenders' standard variable rates.

There was also a big increase in the number of products available for people with only small deposits, as lenders became more comfortable with the risk these borrowers represented.

The number of different mortgage products available also broke through the 2,000 barrier for the first time in more than a year during the month.

But despite the improvement in mortgage rates, the cost of unsecured borrowing increased or remained the same during February.

The average rate charged on a credit card rose to 16.51 per cent, up from 16.37 per cent in January.

It was the fifth consecutive month during which the rate has increased or stayed the same, pushing it up to its highest level since June 2006.

Loan and overdraft rates remained unchanged during the month, but at 18.95 per cent the amount of interest people who go into the red are charged was only slightly below the record high of 18.97 per cent reached in the second half of last year.

There was also further bad news for savers, with the average return paid on a fixed-rate bond dropping for the sixth consecutive month. The products had been one of the few remaining havens for savers.