Fixed rate mortgage deals are currently being priced at the lowest rates for six years.

Figures from the Bank of England show that the average two-year fixed-rate mortgage cost 3.88% in February, down from 3.97% in January and the lowest level since July 2003.

The cost of five-year fixed rates also fell, from an average of 5.56% in January to 5.49% in February.

Conversely, tracker rates, charged at a margin above Bank Base Rate got slightly more expensive, with the average tracker in February costing 3.69%. In historic terms this is still extremely reasonable – in fact it is the second-lowest level since records began in 1997.

Many mortgage lenders have been cutting their rates in recent weeks as competition returns to the market.

Last week Santander (formerly known as Abbey), reduced the rates on its two-year tracker deals available up to 80% loan-to-value by up to 0.74%, reducing the cost of repayments on a £150,000 interest-only mortgage by almost £100 a month.

The Co-Operative Bank, Northern Rock, and Chelsea Building Society have also launched competitively-priced deals in the last few days.

However, although there are more deals around for first time buyers, criteria remain relatively tight. Banks and building societies are still demanding large deposits for the very best rates, and all applicants have to have squeaky clean credit records.

For example, Yorkshire Building Society launched a very competitive two-year fixed rate this week at 2.99%, but the maximum loan-to-value is 50%.

Woolwich also reduced the maximum loan to value on some of its best-buy fixed and tracker deals this week, citing a need to control the level of its mortgage business.

A lifetime tracker charged at Base Rate plus 2.09%, giving a pay rate of 2.59%, is now only available up to 60 % loan-to-value, down from 70% previously.

A spokeswoman said: “The changes are in response to very strong demand for our mortgages over recent weeks. It is important for us to preserve a controlled level of business that ensures we meet our desired levels of service.”