Money Insider: Have fixed mortgages bottomed out?

During the last two months, we've seen the cost of fixed-rate mortgages fall to an all time low, with some jaw-dropping deals on offer.

The sharp decline in mortgage pricing mirrors the trend seen in the money markets, with swap rates for money falling from 3.24 per cent in February to just 1.84 per cent last week.

Even though we've never seen mortgages cheaper than they are now, there will still be some people delaying their decision to switch in the hope that rates will fall even further.

It is human nature to always want to get the very best deal you can, but if you hold out too long there is always the risk that the tide will turn and before you know it, rates are on the rise again.

Historically any five-year fixed-rate mortgage with a rate below 5 per cent was considered a good deal, so to see rates as low as 3.49 per cent for five years and 3.99 per cent for a 10-year term is quite remarkable.

There has been an abundance of economic bad news during the last couple of months, with the eurozone hobbling from one crisis to the next, America losing its AAA rating, extreme volatility in the stock markets and our own economy growing at just 0.2 per cent for the second quarter of 2011. It's hard to believe things can get much worse, but there are other factors which could spell the end of this period of ultra low fixed mortgage rates.

In just over a week from now the Independent Commission on Banking (ICB) is due to publish its final plans for increasing stability and competition in the UK banking sector.

As part of these reforms, there is growing expectation that the ICB will recommend to the Chancellor that the investment banking and retail banking functions of our high street banks are separated or "ring-fenced".

If this recommendation is forthcoming and subsequently implemented by George Osborne, the significant cost implications for the UK banking sector could result in consumers having to pay more for their borrowing, including mortgages.

So if you like the look of some of the latest mortgage deals but are waiting for rates to drop another 0.25 per cent, you may find they never quite reach that level.

Instead, why not look at how low your monthly repayments will be if you lock in now, and remember that this is the amount you'll be paying for the next five or 10 years depending on your choice of term.

The current best buys include a three-year fix from Coventry Building Society at 2.99 per cent with £999 fee, a five-year deal from Yorkshire Building Society at 3.69 per cent with £95 fee and 10 year-fixed at 3.99 per cent and £1495 fee from Chelsea Building Society.

How low will rates go is always the 64 million dollar question, but if your monthly budget is fairly tight and you're not comfortable with a variable rate product, then it may be sensible to consider locking in now rather than waiting for a lower rate that never materialises.

Choosing the cheapest finance for your new car

With the 61-plate registration cars hitting the forecourts, there will be many people looking at the finance options available as they trade their vehicle in for a newer model.

There are some really attractive personal loan deals to be had, particularly as lenders have been trimming rates for larger sums.

For example if you are looking to borrow £7,500 over five years the top loans are from M&S Money at 6.4 per cent APR, costing £145.76 per month or Nationwide BS at 6.6 per cent APR costing £146.42 per month. If you are an existing Nationwide current account customer, there is a preferential rate of 6.3 per cent APR.

Many car retailers will offer their own finance, so if you're checking to compare whether it is cheaper than the banks, ask for the total cost of credit (including all fees) to enable you to make a true comparison.

If it is a smaller sum you're after, some garages may allow you to buy your vehicle via credit card, although not all car retailers will offer this option.

The best 0 per cent credit cards for buys are M&S Money and Tesco Clubcard – both 0 per cent for 15 months so you could benefit from interest-free car repayments during this time and then switch the remaining balance to a loan when the 0 per cent deal ends.

Alternatively, you could pay on a credit card and then arrange to switch your balance to a 0 per cent balance transfer – with up to 22 months currently available from Barclaycard Platinum.

Whichever type of finance you opt for, you'll need a near A1 credit record to be accepted, especially if you're after the best buy deals.

yourmoney@independent.co.uk

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