Best fixed rate deals withdrawn

Banks and building societies have been frantically withdrawing their best fixed rate mortgage deals during the last few days, leaving many homebuyers in a quandary.

Should they opt for the security of a fixed rate loan, even though in many cases these are now more expensive, or should they chance their arm with a discounted rate or tracker deal and hope interest rates don't shoot up?

Unfortunately, there's no one-size-fits-all answer to this question. It all depends on your particular circumstances. But with experts predicting further interest rate rises in the coming months, some would argue that the smart money is on fixed rate mortgages. While many of the best fixed rate loans have been pulled and replaced with pricier deals, there are still good-value loans out there.

We are now well into the spring home-buying season, and house-hunters have every reason to feel a little confused about where the property market is going after City investment guru Tony Dye this week predicted house prices could fall by as much as 30% over the next five years - on the same day that government figures showed that UK property values fell 1% in February. That was in stark contrast to the latest upbeat data from Halifax and Nationwide which indicated the housing boom is gathering pace, with both lenders announcing a chunky increase in prices last month.

But while the messages on the state of the housing market are mixed, one thing pretty much everyone agrees on is that interest rates are on the rise. Earlier this month the Bank of England kept interest rates unchanged at 4% but experts believe the reprieve for homeowners is likely to be short-lived, with many saying an increase in May is a near-certainty. Money traders are betting on a base rate of 5% (ie, four more quarter-point rises) by the end of the year.

Some people taking out a mortgage, particularly first-time buyers on tight budgets, will want to opt for a loan where the monthly payments are fixed because it means you are cushioned from any nasty shocks. Only about one in five new home loans taken out in February was on a fixed rate.

But all the indications are that the growing chatter about rising interest rates is beginning to stir borrowers into action. "We are suddenly seeing a glut of enquiries about fixed rate deals," says mortgage broker Chase de Vere Mortgage Management.

At the same time, though, lenders have been pulling their cheapest deals as a result of Britain's money markets reacting to expectations that America's interest rates will rise sooner than previously expected. The below-5% five-year fixes have now pretty much all gone - a typical five-year fix now has a rate of 5.25%. Last summer you could pick one up at under 4%.

So what are the best deals around? Firstly, with some of these deals you'll need to move fast because they won't be around for long. Ray Boulger at Charcol says: "You either need to act very quickly or be prepared to wait and see if rates edge back". If you're not in a hurry, you may find that rates come back a little, but probably not very far, he feels

Mr Boulger likes:

· Abbey's 4.84% three-year fixed rate. Minimum deposit is 10% and there is a lender fee of £499 and early redemption penalties within the fixed period but not after. But you'll need to get on to Abbey or a broker this weekend because the rate rises to 4.94% on Monday.

· Derbyshire building society's 5.03% five-year fix. You'll need to stump up a deposit of at least 20%, there is a £295 lender fee, there no overhanging redemption penalties and overpayments of up to 10% per year can be made without penalty.

· Buckinghamshire-based Chesham building society's 5.09% five-year fix. Again, the society will lend up to 80% of the property's value, the fee is £295, there are penalties for five years and you can repay up to 10% a year penalty-free plus £500 cashback.

If you're keen on a discount or base rate tracker how about:

· Portman building society's two-year discount offering 2.10% off the standard variable rate, giving a current pay rate of 3.85%. The minimum deposit is 5%, there is a £349 lender fee and there are penalties within the period but not after.

· Abbey's two-year tracker deal where the rate is currently 3.94% (bank base rate minus 0.06% for two years). You need a deposit of 25%-plus and the bank fee is £299.