Capped rate now the better option

When the Bank of England announced this week that it was freezing interest rates for the fifth consecutive month the news was met with relief by homeowners.

But the fact that rates have stayed at 4% - for now - does not take away from experts' predictions that they must go up at some point in the near future, and the effects of this anticipated action are already visible in the mortgage market.

A raft of fixed-rate deals have recently closed and many of the previously appealing three and five year mortgages have disappeared as lenders increase their rates.

Mortgage advisers, Charcol say that more than 50 fixed-rate deals have been taken off the market in the past three weeks alone and that capped deals are becoming a more attractive option as a result.

Alison Cooley of Charcol says: "Up to now, the pricing of capped-rate deals compared with fixed rates has meant that borrowers have effectively paid a premium over the cost of a fixed-rate mortgage but with little, if any, real benefit in return."