The interest rates for mortgages in the UK are at the lowest level they have been in 300 years. Many homeowners are wondering if they should lock in their mortgage at these lower rates in an attempt to save money on their mortgage payments.

The recent news from the mortgage market with home sales up 40% in March is positive indeed and offers a glimmer of hope that the current recession is nearing an end. With the end of the recession, though, interest rates will likely be on the rise.

Nationwide is also reporting that the slide in house prices seems to be levelling off somewhat which is good news for those waiting to sell their homes.

Borrowers are still presented with a problem in the stricter lending criteria for mortgages. They have less equity in their homes than they once did and many of them are facing financial difficulties due to the high rates of job losses. First time home buyers are still not in a position to buy.

There are millions of homeowners in the UK who have a mortgage in place and have benefitted from the lower interest rates. Those with variable mortgages or those that have interest rates that fluctuate with the rates posted by the Bank of England have realized tremendous savings in the past few months in lower mortgage payments. However, financial experts predict that fixed rates will soon start to rise and that now may be the best time to lock in at the low rates.

According to Arieh Zucker of the mortgage brokerage, Windfall Finance, located in West Sussex, “‘Borrowers are enjoying their low tracker or standard variable rate (SVR) mortgages, but they could come to regret their complacency in the not too distant future.”

He goes on to say, “‘Fixed rates may not look so hot in comparison, but it is unlikely they will fall much lower and borrowers stand to lose if they wait too long to act. If property prices continue to slump, borrowers are only making their position weaker for when the time comes to remortgage. This could turn to panic if interest rates suddenly spike up, as happened in the last recession.”

Locking in at a fixed rate for a longer term could pay off for homeowners in the dividends they can earn. Richard Morea of the Bath broker, London and Country Mortgages states, “The difference between two and five-year fixed rates is small. Borrowers who are comfortable locking into a rate for longer should look at five and even ten-year fixes. Most mortgages are portable so it shouldn’t restrict you if you need to move house. A long-term fix provides stability at a time when interest rate changes could be volatile and extreme.”

It is best to shop around to see which lender offers the best fixed interest rate. Many of them do not require you to make the decision immediately and allow you up to three months to decide whether or not you want to take this step.

In order to receive these deals, though, you so have to start planning early because most do require that you reserve the rates three to six months in advance of making a purchase of a home. Take a look at your current mortgage to see when the term ends. If it is within six months, you should start talking to your lender now about locking in at the present rate of interest.

Those homeowners with low tracker rates can afford to wait a little longer. During the time it takes for the interest rates to rise they will realize large savings on their repayments. By continuing to make the higher payment each month that you initially started off with, you will overpay your mortgage and thus pay off the loan sooner than you expected. This is especially true if there is no large exit penalty attached to your mortgage, but you still need to keep a close watch on the interest rates.

Melanie Bien, director at the mortgage broker, Savills, advises, “If you’re not tied into your mortgage rate you could stay on the low variable rate for as long as possible and then move to a fix when you feel rates are going to rise.” She also adds, “Of course, this strategy depends on your attitude to risk. If you can’t afford a significant jump in the base rate it makes sense to fix now. Historically, the base rate at 5% is more likely than the current 0.5%.”

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