Lenders are offering fixed rates below 5 per cent for the first time since January, but borrowers are urged to think carefully because some analysts think interest rates may be close to their peak.

The Bank of England’s monetary policy committee voted to keep interest rates on hold at 5.25 per cent last week.

Most economists are convinced there will be one more rise, to 5.5 per cent, especially following figures from Halifax showing prices up a robust 1.8 per cent last month. However, some think January’s quarter-point hike will prove to be the peak ofthe cycle.

Simon Ward at New Star, an investment house, was the only analyst to predict February’s rate rise.

He said “We remain of the view that a cooling economy and better inflation figures will head off another rate increase.”

Rates in the money markets, where lenders borrow cash to fund their fixed deals, have fallen to reflect the view that we could be close to the peak.

Two-year rates have dropped from 5.82 per cent at the beginning of February to below 5.6 per cent, and as a result lenders including Abbey, Bradford & Bingley and the Nationwide and Derbyshire building societies have reduced their fixed mortgages.

There are now several two-year fixes below 5 per cent. And Derbyshire is offering the opportunity to lock in for 10 years at 4.95 per cent.

Even so, variable rates still look better value — even if we get one more rate rise.

Ray Boulger at John Charcol, a mortgage broker, said: “Some people will always prefer a fixed-rate mortgage because of the security it gives, but it is now too late to buy for protection against further rate rises one because lenders have already factored one more increase in Bank rate into their deals. If you are happy to go for a variable rate, there are some great rates available.

“You will also benefit if we have reached the peak of the current rate-tightening cycle, and the next movement is down.”

BM Solutions has a two-year tracker that is 0.81 points below Bank rate, giving a current rate of 4.44 per cent. Even if interest rates were to rise by another quarter point, the rate would be 4.69 per cent, which is still below the lowest two-year fix at 4.89 per cent, from Stroud & Swindon.

The BM Solutions deal has a 1.5 per cent fee so it is good value only for loans below about £200,000.

If you are borrowing more than that, BM Solutions has another two-year tracker at 0.51 points below Bank rate — 4.74 per cent — which is probably better value. The fee is £1,499.

If Bank rate rose once more, the interest would go up to 4.99 per cent — slightly above the Stroud & Swindon fix. Your repayments with the BM Solutions deals would go from £790 to £832, compared with £815 if you opted for the fix. This assumes you have a £200,000 interest-only loan.

The good news for those who would still prefer the security of a fixed rate is that they are unlikely to get more expensive.

Melanie Bien at Savills Private Finance, a broker, said: “People are nervous about the interest-rate uncertainty. Someone with a £200,000 interest-only variable-rate loan will have already seen his or her monthly payments rise by £125, so the popularity of fixed-rate loans is understandable — many don’t want to risk their outgoings rising again.”

Stroud & Swindon’s 4.89 per cent fixed rate comes with free valuation and legal work. But the fee is high at £1,999 and the most you can borrow is £250,000.

The low maximum loan means Bradford & Bingley’s (B&B) two-year fix at 4.99 per cent works out cheaper for purchases because the fee is lower at £1,299.

Stroud & Swindon’s fix is best value for anyone remortgaging and looking to borrow between £200,000 and £250,000.

If you are borrowing less than £200,000 or more than £250,000, Halifax and Abbey’s fixes at 5.14 per cent are the best deals. Both charge a £999 fee and offer free legal work and valuations.

Derbyshire’s 10-year fix at 4.95 per cent is likely to be attractive to those wanting longer-term security — it is cheaper than the best five-year fix, which is also from Derbyshire at 5.1 per cent. The main drawback of locking into this deal is that penalties apply throughout the fixed-rate term.

David Hollingworth at L&C Mortgages said: “Borrowers are often reluctant to tie themselves in for that long in case their circumstances change.

“However, if you are looking for long-term security, B&B has an interesting deal. It is a 10-year fixed rate at 5.29 per cent, but penalties only apply for five years, giving you the best of both worlds — you know what your mortgage payments will be for 10 years, but can get out if you need to.”

CASE STUDY: ‘We were starting to struggle, so we had to fix’

Sally Silcock and her husband, Malcolm, who have children Sophie, 4, Adam, 3, and dog, Bob, are remortgaging on to a Halifax two-year fix at 5.14 per cent.

Sally, 41, a teacher from Chippenham in Wiltshire, said: ‘We moved house last year and took on a bigger mortgage. We were part way through a discounted term when we moved so we had to take the loan with us and then take a top up on another rate. It is only now that we can remortgage without penalty.

‘Our mortgage payments had gone up so much that we were at the point where we would have struggled to afford the payments if they had risen any more, so we really needed to fix.’