Evidence suggests that lenders have recently been adjusting their fixed rate deals to make them more competitive and tempt borrowers away from cheap standard variable rate (SVR) and tracker loans.  The Council of Mortgage Lenders (CML) data suggests that remortgage activity has increased in the first quarter of this year as borrowers search for a fixed-rate deal amid fears that the base rate of interest will start to rise soon.  There were 33,900 loans advanced in March, up 16% on the previous month and up 17% on March 2010.Chelsea (part of Yorkshire Building Society) has launched a headline-grabbing 3.99% five-year fixed deal, requiring a deposit of 25%.  This is the first time that such a mortgage has dropped below 4% in four months and it is unlikely to be available for long.

Previously, this sort of rate was only available for a 40% deposit.  Royal Bank of Scotland was the last lender to offer a five-year fixed deal below 4%, but its 3.95% deal required a massive deposit of 50%.Experts have said that the Chelsea deal is part of a recent trend for lenders to price fixed-rate mortgages more aggressively and the move could now start a price war.  Two-year fixed deals are starting to come down in price too; Woolwich (owned by Barclays) has launched a two-year deal at 2.99% with a 30% deposit & this is only for Barclays customers that pay £800 a month into their bank account though.  For other customers, the rate is 3.18%, but both loans have a £999 arrangement fee.

Other lenders such as Nationwide, Santander, Yorkshire and ING all have discounted two-year fixed deals, which may be worth looking into if you're in the market for a mortgage right now.Borrowers have increasingly opted for fixed rate mortgages since the beginning of the year, with CML showing that 62% of the total mortgages taken out in March were fixed.  However, thanks to the current noises being made by the Bank of Englands Monetary Policy Committee (who set interest rates), this clamour for fixed-rate deals may have hit its peak for the year.  The indications are that interest rates won't be going up at quite the rate that some experts initially thought, so there may still be a demand for other mortgages, such as trackers for example.Either way, borrowers face a dilemma; going for a fixed-rate mortgage now before interest rates start going up will allow homeowners to take advantage of a discounted deal, but if interest rates end up having little upward trend over the next year or two, then they may well have been better staying put.