Real deals are there for the taking, but be sure to shop around. By Iain Morse
Home loans are the now the cheapest they have been for over a generation - in fact there has never been a better time to look for a mortgage. And the lenders have plenty of money available for new borrowers.

"At around 6.85 per cent, not only is the standard variable mortgage rate the lowest it's been for over 30 years," says Ray Bolger of John Charcol, one of the largest independent mortgage brokers, "fixed and discounted loans are also at an all time low."

In the view of the experts, if interest rates have not bottomed yet, they are nearly there. Patrick Bunton of London & Country, the mortgage advising arm of Chase de Vere, says: "Rates are unlikely to fall much more. After the last quarter point fall, it is apparent that lenders will try not to pass on the full amount of any further cuts."

Today, with competition raging among the lenders, there are plenty of good mortgage deals. So if you are looking to buy a new property, just coming to the end of a previous fixed rate loan, or looking around for a cheaper mortgage, you will find lots of attractive offers.

"Generally, it is no longer worth taking out a capped loan, where repayments fall when interest rates fall but are guaranteed not to go above the quoted rate if they rise during the period of the cap," says Ray Bolger. "In most cases, you'll pay a premium of around 0.5 per cent for the cap.

At present, you can find several fixed-rate loans at 5.5 per cent over five years. The possibility of the standard variable mortgage rate falling below this is virtually nil, so taking a capped mortgage is wasting money. Take a simple example of a pounds 100,000 mortgage. Over five years, the cost for the cap could amount to over pounds 2,000 in extra payments." The real choice, therefore, is between fixed rate or discounted mortgages. Which you should choose depends upon your attitude. If you think interest rates may go lower, or will stay at around current levels for some time, then consider a discounted mortgage.

On the other hand, a fixed rate will suit you if you like the certainty of knowing what your monthly payments will be for the duration of the fix. As your mortgage is still likely to be your largest monthly outgoing, it may be a comfort to know exactly what this will cost you.

The best bargains are usually for two, three or five-year fixed rate or discounted mortgages. When looking for a deal, try to avoid those that carry high redemption penalties and any lock-in afterwards.

Looking at short term fixes, Nationwide is offering a two-year loan at 5.39 per cent, while over three years the Newcastle Building Society will charge 5.19 per cent. The latter also has a five-year fixed rate mortgage with a 5.35 per cent interest rate.

Slightly cheaper is a five-year fix from Birmingham & Midshires, now part of the Halifax, which has 5.34 per cent interest rate if the mortgage is for less than 75 per cent of the property's valuation. If it is redeemed before May 2004, there is a penalty of six months interest.

If the loan is arranged through John Charcol, you will receive pounds 250 cash- back. HMSL, which used to be Halifax Mortgage Services, is offering a five-year loan fixed at 5.44 per cent with reducing penalties during the period, for up to 95 per cent mortgages. This is only available through brokers.

Another good five-year fix, which unusually allows up to 25 per cent to be paid off the mortgage without any penalty, useful for anyone who gets large bonuses, is on offer from the Portman Building Society. The rate of interest is fixed at 5.49 per cent on this loan. If the loan is arranged through London & Country, there will be no valuation fee.

Stroud and Swindon is also offering an unusual deal. It has a five-year loan fixed at 5.75 per cent. Like the Portman offer, it also allows up to a quarter of the mortgage to be redeemed without penalty. But even better, after three years, you have the option to bail out without any penalty and move your mortgage if there are cheaper deals elsewhere. However, it is compulsory to take out the society's building and contents insurance, likely to be more expensive than if you shop around.

When it comes to discounts there are again plenty of good offers that carry no penalty after the discount period. Over two years, the Portman offers a 1.6 per cent discount off its current 6.85 per cent variable rate, with the mortgage capped at 5.99 per cent until May 2001.

Over three years, Alliance & Leicester will give a 1.6 per cent discount although do watch out as, unlike many other deals, this mortgage is not portable. This means it cannot transfer with you if you want to move house during the period. On purchases only, not re-mortgages, the Derbyshire Building Society is offering a 1.25 per cent discount over five years, equal to a 5.45 per cent rate of interest today, with no arrangement or valuation fees.

If looking around, remember there will usually be costs involved in taking out a new loan. If re-mortgaging, you should allow up to pounds 250 in arrangement fees for the new mortgage, about the same for valuation, and around pounds 300 for legal costs. If you are buying a new house, legal fees will be considerably more.

While you can do your own research, many of the best deals are only available through independent financial advisers and mortgage brokers. Some will make a charge, usually no more than pounds 250 for straight- forward cases, while others will look for a good deal for you for free. Don't worry, the latter usually receive commission, anything up to pounds 400 in the main, from the new lender.

Contacts: London & Country on 0800 373300; John Charcol on 0800 718191; Newcastle BS on 0845 6064488; Nationwide BS on 0800 302010: Portman BS on 0800 7319136; Stroud & Swindon BS on 0800 371824; Alliance & Leicester on 0845 3033000; Birmingham & Midshires on 01344 394008; HMSL on 01222 460446; Derbyshire BS on 01332 841000

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