Competition in the mortgage market is now so fierce that anyone paying a full variable interest rate is one of three things ­ a mug, lazy, or someone who doesn't read advice like this.

And, while interest rates may be the lowest since 1965, that doesn¹t mean we should be complacent. They could go up again.

You can easily save at least £50 a month - and that is now a much larger proportion of the monthly bill.

But a word of warning ­ watch out for those hidden charges, arrangement fees and penalties. If it seems to good to be true ­ like offers which can pay you thousands of pounds cash ­ it probably is. That money has to come from somewhere!

The Yorkshire Building Society is currently offering the best fixed rate deal. Their 5.09% deal runs for five years. In common with other fixed rate deals there is a £295 arrangement fee and Yorkshire limits advances to 75% of valuation.

Even better, there are none of the catches attached to so many special deals, like being stuck with that company for years after the special deal runs out ­ or paying a huge penalty.

This is the best deal for decades ­ the risk element over five years can only be for mortgage rates to go up.

An alternative is the Britannia Building Society at the same rate, which only runs for three years but will advance 95% of valuation.

For re-mortgages the best rate is Coventry Building Society, at 5.75% for three years. They pay the valuation and legal fees but only advance 75% of valuation.

The Halifax is offering a headline catching discount rate of 3.6% - but this discount only lasts a year and then you're stuck with them for another four.

If you think interest rates have bottomed out, there are some good fixed rate deals. Unfortunately most of them charge large arrangement fees and trap you in for years after the deal ends.

You could get as low as 1.05% for one year with the Scarborough Building Society. But you are then stuck with whatever variable rate they offer for a further four years.

Much better to go for the Yorkshire Building Society, at 5.09%, which lasts for five years and has a redemption penalty only if you switch before then. Advances limited to 75%. Or the Britannia at 4.99% for two years, with 95% loans.

If you're a pessimist, or realist, go for the 5.49% Britannia rate, which is fixed for 10 years and loans up to 95%.

Don't forget that the valuation is what the surveyor thinks, not what you think, or how much your neighbours got when they sold!
  

©1995-2000 Coventry Internet Developments Ltd