UR TV CAST

More choice over hospital and elderly care.PensionersIncentives to work beyond retirement age. “If the mortgage is a stretch, you might want to fix, regardless of the rate being slightly higher now.”. Labour

Labour
TaxPledges not to raise income tax and promises cuts for families. Other rises not ruled out, notably national insurance.SpendingPromises to implement savings in the Gershon review – to cut more than 80,000 civil service jobs and save £21bn.EducationBig expansion of city academies and specialist schools.

University top-up fees capped at £3,000 over next parliament.HealthMaximum waiting time of 18 weeks from referral to treatment by 2008. “If you are up against it financially, and perhaps borrowing four times your salary, the last thing you will want is a spike in rates,” he says. This will give the best immediate interest rate, and if rates do rise, they will not struggle to meet the extra costs.But buyers who are stretching themselves may want to opt for caution, and perhaps a medium-term fixed-rate loan. Borrowers opting for discounted or other variable mortgages will be exposed to any rise in interest rates.

Whether this is a risk worth taking depends largely on how far a borrower is stretching their budget, in order to buy.At Savills Private Finance, Mark Harris says that a homebuyer who is borrowing a relatively small sum, relative to their salary, may want to opt for a variable rate mortgage. The Cheshire Building Society is offering a three-year discount, with a deposit of at least five per cent, at 4.61 per cent. And both two- and five-year fixed rates remain more expensive than discounted variable rates.Moneyfacts, the financial research service, lists a two-year discounted rate of 4.49 per cent from the Lambeth Building Society for borrowers with at least 20 per cent to put down. But, as almost all fixed-rate mortgages carry early redemption penalties, a shorter-term deal is likely to suit anyone who thinks their circumstances might change in the next few years. For a five-year fixed rate, the Cheshire Building Society is offering 4.98 per cent.In the money markets, longer-term finance for five or ten year loans actually dropped below the cost of two-year funds, although the way lenders market mortgages means that, in practice, longer-term fixed rates are still more expensive than shorter-term deals. None the less, looking at money market rates suggests that economists think that interest rates are at or near their peak, with modest falls in prospect further down the line.For home buyers, the result is that there is no clear-cut choice between short and longer-term fixed rates.

The best option will depend partially on the deals individual lenders are offering, and partially on how sure buyers are about their own circumstances. With little difference in the cost between short- and medium- term fixed rates, buyers may well want to opt for the greater certainty of a five-year deal. Recent changes mean that there is now little difference between short- and long-term fixed rate mortgages. Portman Building Society has a two-year fix at 4.68 per cent, with a three-year deal at 4.79 per cent.

The number of economists who believe there will be a rate rise may be lower than it was a few months ago. But that view is still held by enough experts to tip the balance in favour of a rise, rather than a fall.Mark Harris, managing director at the mortgage brokers Savills Private Finance, says that swap rates fluctuate in the short-term because it is so difficult to predict exactly where interest rates are heading. This prompts mortgage lenders to adjust their deals, in order to reflect conditions in the money market. Some City insiders attribute the rise in swap rates to the fact that one member of the Bank of England’s monetary policy committee voted for a rate rise in February, even though the committee opted to keep rates on hold, at 4.75 per cent.