The cost of taking out a two-year, 75% loan-to-value, fixed-rate mortgage in the UK fell from an eight-year high of 6.6% in June to 6.36% last month, figures from the Bank of England revealed yesterday.

The cost of taking out a two-year, 75% loan-to-value, fixed-rate mortgage in the UK fell from an eight-year high of 6.6% in June to 6.36% last month, figures from the Bank of England revealed yesterday.

This was the first easing of the typical interest rate charged on such a mortgage by UK banks and building societies since February.

However, it is likely to provide at best minor relief to mortgage customers who have faced hikes in arrangement fees and months of rises in interest rates as banks and building societies as a whole have slashed the availability of home-loan finance amid the global credit crisis.

The move by banks and building societies to hike their interest-rate margins on mortgages is still writ large in the 6.36% rate for a typical two-year, 75% loan-to-value mortgage. UK base rates are sitting at 5% and many economists now expect significant cuts in benchmark borrowing costs from the Bank of England next year as the economy struggles.

Rising mortgage rates are partly the result of tighter interbank lending rates amid the credit crunch. But banks, including Halifax owner HBOS, have made no bones about the fact they are charging customers higher interest-rate margins as they continue to bolster balance sheets which have been hit hard by the credit crisis.

In July last year, just before the global credit crisis kicked off in earnest, the typical interest rate on a two-year, 75% loan-to-value mortgage was just 6.07%. UK base rates stood at 5.75% by the end of July last year, so the typical rate charged on such a mortgage is up 0.29 percentage points even though the Bank of England has cut benchmark borrowing costs by three-quarters of a point in total over this period.

Banks' much-reduced risk appetite is also highlighted by the fact that the Bank of England has suspended publication of a typical interest rate for a two-year, 95% loan-to-value mortgage because there have not been enough lenders offering such a product to provide a reliable sample size. April was the last month for which the Bank of England published a typical interest rate.

The interest rate typically charged on a five-year, 95% loan-to-value, fixed-rate mortgage edged up further between June and July, from 7.13% to 7.14%.

The rate on a three-year, 75% loan-to-value, fixed-rate mortgage levelled off after a sharp rise, remaining at 6.39% between June and July.

The typical interest rate on a five-year, 75% loan-to-value mortgage edged down from 6.4% to 6.37%. That on a 10-year, 75% loan-to-value home mortgage dipped from 6.46% to 6.43%.

UK house prices have been falling sharply amid the reduced availability and greater cost of mortgage finance.

Halifax last week reported that the average UK house price in July was 10.9% lower than in the same month of last year - a bigger year-on-year fall than at any time during the residential property market crash of the early 1990s.