According to Bank of England data on lenders’ monthly interest rates, rates for two-year fixed rate 90% LTV mortgages had been on the rise at the start of 2012, reaching a peak of 6.07% in May.

However, after the introduction of the government-backed Funding for Lending Scheme in August, rates began to decline and reached 5.31% by the end of the year.

A Moneyfacts financial expert Rachel Springall said the personal finance data monitor had also observed a decline in rates for two-year 90% LTV fixed rate mortgages from August onwards, but suggested it was too early to say the market had significantly improved.

“Some good rates have been coming out but we do need to see more of them,” she said. “People also have quite high fees – you have to think about the overall package, not just the rates.”

Rates for five-year 75% LTV fixed rate mortgages also dropped over the year, according to the Bank of England data. However, rates for the two and five year products at this LTV ratio rose.

Charwin Private Clients director Ranald Mitchell said while it might be too early to see the benefits of Funding for Lending, he had noticed a trend in decline of rates for higher LTV products.

“The lower risk market is getting a bit saturated so there is a bit more competition at the higher end,” he said. “I would expect that trend to continue.”