Lenders have been cutting the overall cost of mortgage deals by as much as 14 basis points since the start of the year as swap rates have fallen, research by Moneyfacts reveals.

While there have been only tiny fluctuations in the average two and five year fixed rates since January, lenders have made bigger cuts to the total cost of borrowing including fees, the research shows.

The average two-year fixed across all loan-to-value tiers ticked downwards from 2.44 per cent to 2.43 per cent from January to March.

The average five-year fixed dipped from 2.74 per cent in January to 2.73 per cent in February before returning to 2.74 per cent in March.

But when Moneyfacts looked in detail at the true cost of deals offered by the 10 biggest lenders including arrangement fee and based on a £150,000 loan at 75 per cent loan-to-value, it found more significant shifts.

Coventry made the biggest cuts as the average true cost of two-year fixed rates fell by 14 basis points from 1.92 to 1.78 per cent between January and March.

At Barclays the average true cost of two-year fixed rate fell by 12 basis points from 2.08 per cent to 1.96 per cent over the same timeframe.

HSBC and Virgin Money both cut costs by 4 basis points and smaller reductions were made at Lloyds, Nationwide and Yorkshire Building Society.

Coventry also cut the true cost of its five-year fixed rates by 14 basis points.

Smaller reductions were made by Nationwide, Yorkshire BS, Barclays and HSBC.

The cuts come on the back of a drop in swap rates over the past month as two-year swaps dropped by 17 basis points, while the five-year swap rates are down by 16 basis points to reach 0.49 per cent and 0.5 per cent respectively.

Moneyfacts finance expert Eleanor Williams says: “With consumers becoming increasingly savvy, many are aware that interest rates are at historic lows for mortgages, and so the next logical step for them is to consider the overall package of a deal. 

“Some fees in this sector are currently as high as £2,000 or more, so borrowers need to be careful that they are not swayed by just a tempting rate and should carefully consider the total deal they are taking on. 

“This is particularly true on shorter-term deals; for a two-year fixed mortgage, the borrower will only have 24 monthly repayments over which to recoup the difference between the repayment required on a lower rate deal with a high fee, and the monthly payments they would make on a higher initial mortgage rate but with a significantly lower, or in some cases no fee. 

“This caution would be even more important for those who do not have the savings to cover a fee payment upfront, and therefore might consider extending their mortgage borrowing in order to pay this, and paying interest on that fee moving forwards, on top of their existing mortgage balance.”

Williams says that falls in swap rates tend to slowly filter through to the rates offered by lenders.

But she adds: “As we have established that overall average rates appear to be stagnant despite the swap rates decreasing in the last couple of months, this begs the question as to whether these rates might have already reached their lowest point. 

“If this turns out to be the case, then the result of this month’s Monetary Policy Committee decision on whether or not to cut the base rate is potentially one that should not be holding mortgage borrowers back from moving forwards in search of new deals.”