Interest rates on new mortgage deals have fallen to their lowest level since 1988, according to the financial information service Moneyfacts.

It says this is due to lenders finding it cheaper to raise funds in the financial markets.

This has been due to the realisation that the Bank of England is unlikely to raise its bank rate above 0.5% soon.

However most mortgage deals still require buyers to put down at least a 20% deposit.

"Earlier this year the market expected a rise in bank base rate, that saw mortgage rates start to rise," said Michelle Slade of Moneyfacts.

"An imminent rise in bank base rate now appears unlikely, and the cost of funding on the swap rate market has reduced."

"Lenders appear to be applying cuts equally across all loan-to-value (LTV) tiers, which is good news for first-time buyers, as previously cuts were only being applied to the lower LTV bands," she added.

The swaps rate determines the cost of borrowing for banks and building societies when they want to borrow longer-term money in the financial markets at a fixed rate to lend onto their customers.

The market provides an indication of when banks expect the Bank of England to raise short-term interest rates.

Until recently, a rate rise had been expected as soon as September.

But following a set of weak economic data, as well as the decision by a new member of the Bank's rate-setting committee to vote for no change in rates, markets now do not expect a rate rise until well into next year.

According to Moneyfacts, the average two-year fixed rate deal is now at 4.32%, three year fixed deals now average 4.92%, five-year fixes are at 5.29% and the average two-year tracker deal is now at 3.37%.

Clare Francis at said: "Interest rates will start rising at some point though, so anyone considering a variable rate deal needs to make sure they'll be able to afford higher monthly repayments