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Mortgage interest rates are back to the same level they were at in August 2007 at the start of the  UK credit crunch, according to research by price comparison website Moneyfacts.

The average  mortgage interest rate on a two-year fixed deal is now 6.59% - almost the same as 6.56% in August 2007 and down from 7.08% in early July this year.

However, the costs associated with mortgages remain higher than last year.

The best rates are only available to those with large deposits and lenders are also charging higher fees to obtain these deals.

Moneyfacts stated that the average mortgage arrangement fee was now £964 compared with £803 in August 2007.

There is less competition in the UK Mortgage market, with only 3,748 products on offer compared with 13,027 in August 2007.

Borrowers are also required to put down much higher deposits than a year ago. An average of 20% is now the norm, Moneyfacts says.

“The pricing is getting back to where we were a year ago, but the appetite for lending is diminished,” said Darren Cook, a spokesman for Moneyfacts.

While the rates are at similar levels as last year the banks are potentially making more profits on mortgages than a year ago.

Official interest rates, on which fixed mortgage rates are indirectly based, are now 5% compared with 5.75% in August 2007, which means lenders are getting better returns on the products offered.

Abbey, Nationwide and HBOS have been among the lenders that have been cutting their rates.

Lending to homeowners has slumped dramatically in 2008, because the credit crunch has dried up the supply of funds available to banks.