Research has revealed that interest rates for first time buyers with deposits of 10% or more have reduced by more than 30% in the past three months.

The average initial mortgage rates for borrowers at 90% loan-to-value (LTV) have dropped to 5.3%, which is 1.7% lower than the 7% average in November 2009 and has the effect of reducing monthly mortgage payments by some £160 on a £150,000 mortgage.

A recent mortgage match survey revealed that the best mortgage deals at 90% LTV are still more than double the average rate of 2.58% that applies to mortgage borrowers looking for a 60% or lower LTV loan.

The reduction in interest rates is evidence that confidence is returning to the mortgage market, investors are starting to return, freeing up the money needed to create lending pools for UK homebuyers and refinance mortgage customers.

The best mortgage deals being offered as 90% LTV, include tracker mortgage deals from lenders like Nationwide, Skipton, HSBC, Santander, Cheltenham & Gloucester and Saffron Building Society. There are also fixed rate mortgage deals available, but the only fixed rate deal to make the top 10 best buys on total cost comes from HSBC with a two-year fixed rate at 5.99%.

Mark Leaper at Moneymatchmaker.com commented saying: "This is great news, confidence is returning, with some lenders showing that they are once again prepared to lend at 90% LTV, whilst pricing their mortgages at rates that are also beneficial to borrowers.

I would expect the mortgage deals on offer at 60% LTV to be considerably cheaper, as lending is priced based upon risk and borrower equity at levels of 40% or more is much more attractive to the investment market".