Get a fix, or go with the flow?

While stocks last this may be a good time to find a fixed-rate mortgage. By Clifford German

Fixed-rate mortgages have been harder to find in the past month or two, as several lenders have withdrawn offers altogether or replaced them with higher rates. On the generally sound principle that if the bank manager is no longer keen to lend you an umbrella it is certain to rain, it is worth asking whether the time is right to get a fixed-rate mortgage while stocks last.

There are fixed-rate mortgages still on offer, and they are generally cheaper than the current variable rates, which at present range from 6.29 to 7.24 per cent. According to MoneyFacts, the Norfolk-based data base, Alliance & Leicester has a rate of just 1.5 per cent plus a 0.5 per cent fee fixed until next April, while Cheshire BS is charging 2.49 per cent until July next year with a pounds 300 rebate.

Bristol & West is charging 4.24 per cent fixed plus a pounds 275 fee until the end of March 1998, Coventry is charging 3.95 per cent plus fee for two years and 6.99 per cent plus rebate for four years, and First National BS is offering three-year money, fee-free, at 5.90 per cent fixed. Portman BS is offering a fixed rate of 5.99 per cent until May 1998 and West Bromwich is offering 5.99 per cent fixed for three years.

If you want to go really long, however, rates do start to rise. Coventry BS will lend you five years fixed at 6.79 per cent but the cheapest 10- year money will cost 8.45 per cent from TSB and 8.49 per cent from Leeds & Holbeck.

Before you rush for a fixed rate you have to ask two questions: are interest rates going to rise? And will they stay high for most if not all the time you have locked yourself in for?

Money markets have been signalling for almost six months now that three- to five-year money rates are rising, and this has now spread to the short- term rates. But this week's data for economic growth suggest that the economy is weaker than expected, and unless you believe that Tony Blair will loose the dragons of spending and inflation and mortgage demand will rocket, there seems little point in paying over the odds for a fixed rate. There are plenty of borrowers around who locked themselves into fixed rates of 8 per cent in 1995 and are still kicking themselves.