Should you fix your mortgage?

The leading two-year fixed rate deal is available from First Direct at 5.49% with a £1,498 arrangement fee for loans up to 80% of the property’s value. ING Direct also has a competitive two-year deal at 5.69%, for loans up to 75% of the property's value with a £1,999 arrangement fee.

If you have a deposit of less than 20%, Skipton building society has a two year fix at 5.79% that is available for loans up to 95%. The fee on this deal is £799.

The best three-year fix is from Norwich & Peterborough BS at 5.84%. Although the rate is slightly higher than the best two-year deals, the arrangement fee is lower at £695 so it may be a better option for those wanting to keep upfront costs down or who have smaller mortgages. This product is available for loans up to 85% of the property's value.

If you would prefer longer-term security, Natwest has a five-year fix at 5.89%. This is available for loans up to 75% and the fee is £999. You can actually get a lower rate though if you are prepared to tie yourself in to an even longer deal.

Principality building society had a 10-year fix at 5.58%, although this increased to 5.76% on June 9. The fee is £999 and the deal is available for loans up to 75%.

However, long-term fixes aren't for everyone so think carefully before you sign up for such a deal - an early redemption charge applies for the full 10-year term so it will cost you if want to get out of the loan early.

Are variable rates still worth considering?

Even though the City seems to think that interest rates may rise later this year or early next, it is by no means a done deal. You only have to go back a matter of weeks and the consensus view was that we would see further cuts over the coming months.

We are in highly unusual times at the moment. On the one hand inflation is climbing, but on the other hand, the economy is faltering. Latest figures show business is declining for the first time in five years, job losses are on the up and house prices continue to fall – prices fell by an average of 2.4% in May according to Halifax and are 3.8% lower than this time last year.

If the economic situation deteriorates further, interest rate cuts could well be back on the cards. Halifax's chief economist, Martin Ellis, spoke to Moneysupermarket's site editor, Clare Francis, recently and he thinks the MPC could cut the Bank rate by up to 0.5 percentage points before the end of the year – this would take it to 4.5%.

Variable rate gamble

Some borrowers may therefore be prepared to gamble and opt for a variable rate deal so that they will benefit from lower mortgage payments if rates do fall.

HSBC has a two-year discount at 5.43% - lower than First Direct's market-leading two-year fix. The fee is also attractive at £999 and the deal is available for loans up to 90% of the property's value.

Another attraction of some variable-rate mortgages is the fact that they are very flexible. While most fixed rates lock you in for the duration of the fixed term, many lifetime trackers are completely penalty-free which means you can redeem the loan at any time.

If you have a deposit of 40% or more, Woolwich has a lifetime tracker at 0.74 points above Bank rate, giving a current pay rate of 5.74%. Alternatively HSBC is offering a lifetime tracker at 5.99% - 0.99 points above Bank rate. HSBC's deal is available for loans up to 90%. Another great thing about these two products is that there are no arrangement fees, so set-up costs are minimal.