First Direct, the online and telephone lender owned by HSBC, has started selling mortgages again to new customers after withdrawing from the market seven weeks ago.

Mortgage experts are hoping that First Direct's re-entry into the market signals an easing in the mortgage market and better times ahead for borrowers.

Since First Direct pulled out of the market, rates have risen significantly. It remains competitive but is not the cheapest on the market.

The bank's two-year fixed rate of 4.75 per cent had been one of the best on offer to homeowners - a monthly cost of £594 on a typical £150,000 interest-only homeloan.

Now it charges 5.76 per cent, with a £499 booking fee and £1,499 arrangement fee. Monthly repayments would be £720 on £150,000. All its deals are only available up to 80 per cent loan to value and on loans of £400,000 or less.

Borrowers can get a two-year fix of 5.75 per cent from Loughborough building society. Monthly repayments would be just £1 less at £719 but the deal has a much lower £649 arrangement fee and is available up to 90 per cent loan to value. Skipton building society offers 5.79 per cent fixed for two years up to 95 per cent loan to value with a £799 fee.

Some of First Direct's rivals have started to reduce rates slightly. Halifax will cut the interest rates on some of its mortgage deals tomorrow. From Wednesday it will reduce some offers by 0.15 per cent, but only for existing borrowers seeking to remortgage.

Last week, two of the UK's biggest mortgage lenders, the Abbey and the Nationwide, also made cuts to the interest rates on some of their home loans. Nationwide, the biggest building society, was the first to move last week, lowering its five-year fix by 0.30 percentage points to 5.95 per cent. It also cut its headline two-year fix, albeit by just 0.15 points to 6.15 per cent.

Abbey followed suit by cutting its trackers by 0.05 points and its five-year fix by 0.17 points to 5.75 per cent.

First Direct withdrew from the mortgage market on April 1 after being deluged by new applicants desperate to lock into a competitive deal as rivals raised their mortgage rates or withdrew offers due to the credit crunch.

Chris Pilling, First Direct's chief executive, said: "Last month we took the bold decision to withdraw from mortgage sales to non customers to allow us to process the huge number of enquiries we had received and focus on the excellent service we want to provide for our customers. We've now assessed all the loan applications outstanding from April 1 and earlier."

Andrew Hagger of Moneynet.co.uk, a comparison site, said: "This is extremely welcome news for potential home buyers and movers and a much needed tonic for what has become a battered and volatile mortgage market. It will be interesting to see if these green shoots are followed by other lenders returning to market with an increased range of competitively priced mortgages."