Autumn Property Survey: Borrowers adrift on a sea of offers: Andrew Bibby navigates a way through the tide of attractive mortgage deal

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It is a buyer's market at the moment - not just for houses, but also for the mortgages needed to pay for them. Borrowers may not realise it, but they have the upper hand when it comes to selecting their mortgage company.

The problem, however, is knowing how to spot the bargains in an increasingly complicated market. Wading through estate agents' details to find your ideal home can seem child's play compared with the task of identifying the mortgage that's right for you.

'It is confusing out there,' agrees Walter Avrili, operations director at the mortgage brokers John Charcol. 'It really depends how high you think that interest rates will be in the next couple of years.'

The first decision to take is whether to opt for a fixed-rate or variable-rate mortgage. For years, almost all mortgages in Britain were variable-rate: what you paid went up and down as bank interest rates moved.

But after the traumas of the late 1980s the market lurched over to fixed-rate deals.

Monthly payments are guaranteed at a set level for the period of the fix (typically three to five years, although shorter or longer deals are available) after which you are pushed back on to the prevailing variable rate.

The problem for building societies (although not for other lenders) has been that they are legally restricted in the amount of money they can borrow on the money markets to finance fixed-rate deals. Furthermore profit margins on variable-rate mortgages, which are financed directly by members' savings, can be stretched further, by keeping down the interest paid on investment accounts.

For these reasons societies have an interest in selling variable-rate mortgages and have been actively developing a wide range of discounts and cashback deals to tempt homebuyers away from fixed-rate products.

Choosing between fixed-rate and variable-rate deals, therefore, means comparing the interest rates on offer, trying to guess the likely movement of interest rates in the future and also weighing up the value of any incentives available.

But it also means watching out for the snags, such as any requirement to take out compulsory insurance or endowment policies with the lender.

Fixed-rate mortgages normally have an arrangement fee (typically pounds 200-pounds 250) and will carry redemption penalties for early repayment, although most, but not all lenders will allow you to carry forward a fixed-rate loan if you move home during the period of the fix).

According to Ian McKenna of the brokers Blyth McKenna, homebuyers are still very wary of variable-rate mortgages. 'Most people have sufficiently good memories to recall what happened to interest rates in 1988 and 1989. We're dealing these days with a far more cautious type of homebuyer,' he says.

He adds that the majority of his firm's clients are opting for fixes, typically over five years. As he points out, this takes the fix fairly comfortably beyond the immediate fall-out from the next general election.

Choosing a five-year fix does mean, however, that your initial mortgage payments will be higher than they would otherwise need to be. For example, Britannia's five year fix at 8.7 per cent (for loans of up to 90 per cent of property value) is currently one of the better fixed-rate deals available but is higher than the society's variable rate of 8.14 per cent.

It needs to be compared, too, with the Britannia's cut-price first-year rate of 2.74 per cent, which it offers on new variable-rate business. First-time buyers may qualify for an even deeper discount, to 2.49 per cent.

Britannia is not alone in trying this sort of come-on for its variable-rate products. The Mansfield, Northern Rock and West Bromwich building societies all currently have first-year rates below 3 per cent, while several lenders (including the Chelsea, Coventry and Derbyshire societies) have two-year discounts to 5.5 per cent or below.

But anyone tempted by these sort of offers needs to remember that the lower the discount, the higher the jump in mortgage payments when the initial discount period is over.

Some lenders have also developed mortgage packages which refund valuation and legal fees, or which include free buildings insurance. Lump-sum refunds are another alternative to discounted rates. However, the Inland Revenue is looking closely at the tax position of cashback payments, and while income tax seems unlikely to be a problem, borrowers may run the risk of a capital gains tax liability where their allowance has been otherwise exceeded.

Ian McKenna says: 'A huge question-mark is hanging over cashback schemes, with the Revenue saying that they are looking at each case separately.'

Even after borrowers have made up their minds between fixed-rate and variable-rate mortgages, the old decision of the best repayment method still remains to be taken.

Lenders have long extolled the virtues of endowment policies (understandably, since they make substantial commission on the policies they sell). Two-thirds of new mortgages continue to be endowment-linked, but borrowers are looking at alternatives.

As well as the traditional repayment method, it is possible to arrange interest-only mortgages or to link a mortgage loan to PEPs, personal pensions or other investments.

Lenders are revising their package of mortgage products every few weeks, so today's bargain deal may not necessarily be available when you are ready to exchange contracts.

One possible source of information is the daily update of mortgage products produced by MoneyFacts magazine. This is available by fax at premium-rate telephone charges (dial 0336 400239 from a fax machine).

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