Spring Property Survey: Fixing your loan at the most attractive rate: Neasa MacErlean shops around for mortgage bargains and suggests ways newcomers to the property ladder can stay in control

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ONE OF the achievements of this recession has been the promotion of fixed-rate mortgages. Until 1990 there were very few fixed-rate mortgage products on the market. Now there are more than 100 and half of all new mortgage business is offered at fixed rates.

The largest firms of independent financial advisers are widely recommending the product - but fixed rates are not suitable for everybody. A fiveyear fixed-rate mortgage will usually cost an extra pounds 250 to arrange. If the borrower redeems the loan early, he or she will typically have to pay a penalty of six months' gross interest payments. For many people, however, the extra initial expense and the relative inflexibility of fixed rates are more than offset by the extra security that they provide. Five-year fixed rates are hovering around the 8 per cent mark (with some signs that they could be on their way up). Two-year rates are typically under 7 per cent.

Shopping around is always a good idea but many of the less competitive fixed rates are still good value. No one would be at all surprised if the prevailing floating mortgage rates were to rise over the next few years. And some building societies have already suggested that rates might have to go up by the end of this year.

After the difficult years of the early 1990s, the mortgage market has again started to become fiercely competitive. You may find that the new entrants to the market frequently provide the best deals. The mortgage wings of the insurers Sun Alliance and Legal & General have offered some of the best deals this year.

Not only does the Sun Alliance offer some of the lowest rates available - 5.25 per cent variable, 6.45 per cent fixed for two years - but it also offers some very attractive deals on valuation and legal fees. Sun Alliance will cover the legal cost of remortgaging if the borrowers use Sun Alliance solicitors. On the two-year fixed rate it will also cover the valuation fee.

Many prospective buyers can do themselves a favour by looking beyond the top building societies for mortgages. What Mortgage magazine recently christened the Chesham Building Society, the 66th largest, the best overall lender in the country. The Chesham offered the best deals historically on two-year, five-year and 10-year mortgages.

Among the top five lenders over 10 years, the largest was the Hanley Economic Building Society, the 50th largest. Most of the smaller building societies, however, will only lend in their own local areas.

Among the banks, one of the most competitive players is the Royal Bank of Scotland. Unlike most other lenders, it is still prepared to make 100 per cent loans. Unusually too, it does not require borrowers to pay a mortgage indemnity fee - an extra one-off charge which on a pounds 100,000 property, for instance, can amount to pounds l,500.

As Britain appears to be coming out of the recession, two new trends are also beginning to emerge in the mortgage market - a fear of endowment mortgages and a desire, among people who already have a fixed rate mortgage, to remortgage at a lower rate.

Remortgaging, however, can be very expensive. John Charcol, financial advisers, calculate that a remortgage on a pounds 50,000 loan costs an average of pounds 1,800. (Most of the cost is attributable to early redemption penalties for people who already have a fixed-rate loan.)

The financial advisers, however, still recommend endowments as long-term products. Phillip Cartwright, of London & Country, said: 'There is unease about endowments. But as long as people understand what they are buying, there is no reason why they should not be a good option.'

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