Should I fix my mortgage rate?

Q I am thinking about buying a house with my partner but we can only just afford the mortgage. Although we don't have any other debts - eg credit cards or personal loans - I want to be sure that the monthly payments won't go up. I don't want to be stuck with a huge mortgage debt I can't pay in the future. What's the best course of action to take?

A LL

A Interest rates are at their lowest level for around 40 years, and now is not a bad time to think about fixing your mortgage rate for two years or more. The Bank of England has just recently taken the decision to leave bank base rates unchanged at 4%, and economists have mixed views on whether the next move will be up or down.

Even if rates fall slightly, it may be worth fixing your repayments now so that you have the security of being able to budget well into the future. Ray Boulger, senior technical manager of Charcol, the mortgage broker, says: "People tend to fix for two to five years. You will probably pay a premium for a five year deal in the form of an extra 0.5% on your interest rate, compared to a two year deal."

It is as important to look at the overall mortgage package rather than just the headline rate, particularly if you are planning to arrange a five-year deal. Mr Boulger says: "The longer the terms of the deal, the more important it is to build in flexibility. There is a small premium for a five year deal but you have to ask yourself whether you would rather have a two-year deal and reassess further down the line."

It sounds as though you need to decide how soon you are likely to move and how important it is to ensure your monthly outgoings don't increase over the medium term. You could also look into taking out a mortgage payment protection plan which would pay your mortgage if you lost your job or were sick or injured. This type of insurance is, however, very expensive and could add as much as ?30 a month to your mortgage bill - a fee which you may not be able to afford.