The average rate on two-year fixed rate mortgages has fallen below seven per cent, bringing a modicum of respite to cash-strapped borrowers.

According to Moneyfacts, just ten days age the typical rate on these deals peaked at 7.08 per cent - its highest rate in a decade
However, signs of an easing in conditions in the money markets mean that lenders have been able to cut the cost of deals, with the average rate now standing at 6.96 per cent.

The cost of three and five years fixes has also been cut by lenders, with typical rates now at 7.18 per cent and 6.99 per cent respectively.

However, Michelle Slade, an analyst at Moneyfacts, cautioned against interpreting the fall in the cost of fixes as a sign that mortgages will be cheaper from here on in.

She said: "We need to see a more prolonged period of rate reduction, something which is starting to look unlikely. Although the average two-year swap rate is well below its peak of 6.52 per cent in mid June, in the last few days swap rates have started to edge up again.

"If this continues we could see lenders once again passing the increased cost back onto consumers."