First Direct, part of the HSBC banking group, has started selling mortgages again to new customers, six weeks after it called a temporary halt.
It stopped offering them on 1 April after being deluged by new applicants as the mortgage drought took hold.
Meanwhile the Halifax has become the latest big lender to cut the interest rates on some of its mortgage deals.
From Wednesday it will reduce some offers by 0.15%, but only for existing borrowers seeking to re-mortgage.
Last week, two of the UK's biggest mortgage lenders, the Abbey and the Nationwide, made slight cuts to the interest rates on some of their home loans.
These were early signs of a possible easing in the UK mortgage market, which has shrunk dramatically because of the credit crunch affecting the banking system.
"Our price reductions, for existing customers only, are on both our intermediary and branch based ranges," the Halifax said.
"These price reductions reflect a recent, modest, reduction in the still very high cost of Libor related funding."
Backlog
First Direct was the first bank to withdraw its entire mortgage range to avoid being swamped by new business, but it said it could now handle new applications after clearing its backlog.
Chris Pilling, First Direct's chief executive, said his staff had processed a year's worth of applications in just three months.
"Last month we took the bold decision to withdraw from mortgage sales to non-customers to allow us to process the huge number of enquiries we had received," he said.
"We've now assessed all the loan applications outstanding from 1 April and earlier and let everyone know the outcome," he added.
More recently though, First Direct's parent group, HSBC, has been taking a big share of the market for new mortgages though its Rate matcher offer.
This has been pitched at people who are trying to move their loans from other lenders, such as the Northern Rock.
It offers to match their expiring fixed rates and, according to the bank, has attracted four times the number of enquiries that it would normally receive.
The deal has been extended to the end of June.
Fewer transactions
As a result of the credit crunch most lenders have been rationing their lending by withdrawing existing mortgage deals and pushing up the price of the remaining loan packages they have on offer.
Typically, borrowers are now being asked to pay higher interest rates and to put down deposits of at least 10%.
The Bank of England has sought to ease the situation by making billions of pounds available to commercial banks in the form of special loans.
But on Monday there was a warning that the credit crunch and mortgage squeeze were far from over.
The Royal Institution of Chartered Surveyors (Rics) warned that the number of property sales this year might fall by 40% as new borrowers find it impossible to raise the money they need to buy a house or flat.
Prices are widely reported to be falling and industry figures have shown that mortgage lending for house buyers has already fallen to its lowest level for 33 years.
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