Find the right mortgage

Lenders make most money by charging their standard variable rate (SVA). This is normally between 2 and 3 per cent above the Bank of England base rate for lending, and can be changed in line with that rate.

It is worth bearing in mind the way a lender treats existing customers paying the SVR if you are considering applying for a new mortgage. You will, after all, become an existing customer when your special deal expires.

Many lenders follow the example of the Halifax, the UK's biggest lender, by setting their SVR at the higher end of the scale. But some have tried to retain existing borrowers or to prove the benefits of mutuality by charging less. HSBC, for example, now charges 6.75 per cent, while the Nationwide building society standard rate is 7.09 per cent.

Even so, you may be able to save by switching to one of the following special deals:

Fixed rate

The interest rate is fixed for a predetermined period, usually between two and five years. Once this ends, you pay the lender's SVR.

Advantages: This is good for people who are living on a tight budget and can't afford to see their monthly payment rise.

Disadvantages: If interest rates fall, you may miss out on a cut in your monthly payments. You usually have to pay early redemption penalties if you end the loan during the fixed period, and particularly cheap rate loans may have penalties that extend beyond that, tying you to paying the lender's SVR.

Discounted

The interest rate is discounted from the lender's SVR by a certain amount for a predetermined number of years. Your payments will move up or down in line with any changes to the SVR.

Advantages: If interest rates fall, you should benefit from lower payments.

Disadvantages: If interest rates rise, your payments could go up, so these loans are not suitable for anyone who really can't afford to pay any extra. The conditions attached to discounted mortgages usually include early redemption penalties during the discounted period, and these may extend beyond the discount if the loan is particularly cheap.

Capped rate

The top rate you pay is fixed, or 'capped', at a certain level for a set time. But if interest rates fall during that time, your monthly payments should fall in line with any changes to the lender's SVR. It is less commonly available than fixed or discounted loans.

Advantages: Good for someone on a limited budget, enabling them to benefit from base rate falls but protecting them from rises.

Disadvantages: Lenders can be tardy in passing on the benefit in base rate cuts. Early redemption penalties during the capped period, and beyond for competitive loans.

Tracker

The interest rate is set at a predetermined level above or below the Bank of England base rate, rising and falling in line with any changes during the tracking period.

Advantages: Similar to a discounted loan: if base rates fall, the amount you pay falls. There are often no early redemption penalties.

Disadvantages: Likewise, if rates go up, so will your payments.

Cashback

Borrowers are paid a lump sum of cash on completion.

Advantages: Upfront cash can be very useful for people who want to make alterations to their homes.

Disadvantages: Interest is charged at the lender's SVR. These loans have long early redemption periods - you might have to pay penalties to get out for up to six or seven years after taking out the loan, tying you into the lender's standard rate for a very long time.