The interest rates on Britain's most popular mortgage deals have fallen to the lowest point in five-and-a-half years, revealing that the Bank of England's six successive interest rate cuts are making an impact on the housing market.

The Bank released figures today showing that the average rate of a two-year fixed-rate deal for borrowers with a 25 per cent deposit has dropped from 4.35 per cent in February to 4.01 per cent last month. In July 2003, the average rate was 3.87 per cent.

The figures also show that the average standard variable mortgage rate fell to the lowest level since the central bank started compiling the data 14 years earlier, to 4.03 per cent in March, down from 4.38 per cent in February.

However, longer-term mortgage fixes, favoured by mortgage brokers who warn against the threat of rising interest rates in the future, have not fallen as far, according to the figures.

The average rate on a five-year fixed-rate loan with loan-to-value ratio up to 75 per cent eased slightly from 4.97 per cent in February to 4.96 per cent last month, while the cost of a ten-year fixed-rate mortgage actually rose. Borrowers with a 25 per cent deposit were charged an average rate of 5.65 per cent, up from 5.55 in February.

The Bank's Monetary Policy Committee held the base rate at 0.5 per cent today after six consecutive months of cuts that have seen the cost of borrowing plummet from 5 per cent in October last year.

Mortgage lenders have reacted to the cuts by lowering fixed rates, although experts have criticised banks and building societies for not passing on the full drop in borrowing costs to customers.

The rates on new tracker deals, which are pegged to the base rate, also fell last month, the Bank data shows. New borrowers with a 25 per cent deposit paid 3.98 per cent in March, down from 4.3 per cent in February and 7.04 per cent in October last year.

However, while the pay rates on two-year tracker deals have sunk, the margins charged by lenders have jumped considerably, from an average of 0.59 points above base in October last year to 3.2 points above base today, according to separate research from Moneyfacts.co.uk, the financial website.

Howard Archer, chief UK and European economist of IHS Global Insight, said: "These figures will obviously provide a boost to consumers' purchasing power and also provide support to the housing market.

"Nevertheless, we suspect that consumers will still be reluctant to spend overall due to the serious pressures weighing down on them - notably, soaring unemployment, diminishing wage growth and serious concerns about the future. Many households will probably try to use their reduced mortgage payments to improve their balance sheets."

The returns on an average branch-based account increased last month, from 0.16 per cent to 0.19 per cent, but the rates on tax-free Isa accounts continued to fall, the Bank data showed.

The interest rate on instant access accounts remains at the second-lowest since records began in 1995. The average payouts on fixed-rate bonds rose marginally, from 2.63 per cent to 2.65 per cent between February and March, but were less than half the 6.06 per cent consumers could get as recently as July last year.

The returns on tax-free Isas continued to decline, despite banks and building societies traditionally launching offers during March to tempt savers to use up their annual allowance before the start of the new tax year.

The average interest rate on the accounts fell by a third from a record low of 0.96 per cent in February to 0.63 per cent. In October last year, Isa accounts paid an average rate of 4.36 per cent.