Two-year fixed-rate mortgage deals are losing popularity as the rising cost of mortgages means that even the most creditworthy of borrowers will have to pay thousands extra to renew.

Figures calculated for The Times show that a borrower who has 25 per cent equity in their home and a £150,000 mortgage with Halifax will pay more than £3,300 extra over two years if they choose the lowest-rate two-year fix available from the lender today.

Rising interest rates and a tightening of mortgage deals — a byproduct of the credit crunch — mean that all banks are offering less generous deals. Borrowers at Cheltenham & Gloucester will pay more than £3,400 extra for a new two-year fix.

Experts say that this is prompting many of the 1.4 million homeowners coming to the end of fixed-rate deals this year to look at longer fixes or tracker loans that move in line with the base rate.

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Ray Boulger, of John Charcol, the mortgage broker, said: “Two-year fixes will be less popular as arguments for not taking one out outweigh those in favour. People will want to wait until the credit crunch subsides and interest rates fall further.”

Mortgage lenders, who have been able to secure funding only at high rates of interest in the wake of the credit crunch, have been passing rate rises on to borrowers in an effort to protect their margins.

In addition, mortgage arrangement fees have risen sharply.

Two years ago, it cost about £400 to set up a two-year fixed-rate deal. Now an arrangement fee of £1,000 or more is not unusual.

First Direct offers a two-year fix at 4.75 per cent, but the fee is £1,498. Alliance & Leicester's two-year fix pegged at 4.99 per cent has an arrangement fee of 2 per cent of the mortgage.

A homeowner with a home loan of £320,000 will pay a fee of £6,400.

A record proportion of borrowers took out tracker deals in January, according to the most recent figures from the Council of Mortgage Lenders.

A third of mortgage deals were trackers, the highest figure since the CML started to compile tracker data in 2005. The number of fixed-rate deals slumped to 57 per cent, down from 64 per cent in December. This is the lowest rate since June 2005.

David Hollingworth, of London & Country, the mortgage broker, said: “Longer-term mortgages are potentially a viable solution, and we could see the popularity of two-year fixes wane.”

Arrangement fees and interest rates on three and five-year fixed-rate deals are often similar to two-year deals.

Louise Cuming, of Moneysupermarket.com, the online price comparison service that compiled the figures, said: “Five-year fixed rates are becoming a lot more popular. This tends to be a good compromise, as borrowers are not tied in for too long.”

Mr Hollingworth said: “Lenders may also start to concentrate on the three to five-year fixed-rate market to bring in longer-term business.”

Borrowers are also looking at tracker deals, since the indications are that the base rate will fall this year.

Jonathan Cornell, managing director of Hamptons Mortgages, a mortgage broker, said: “For the forseeable future, the base rate is only going one way, and that's down.”

Mr Cornell said that tracker deals had also become more expensive after the liquidity crisis. Halifax has increased the rate on its two-year tracker deal by 0.2 percentage points twice in the past two weeks.

“All deals look very expensive at the moment compared to the past five years,” Mr Cornell said.

Borrowers may be better off opting for a deal with a wait-and-see option, rather than allowing their deal to revert to their lender's expensive standard variable rate.

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