Here's how to negotiate the minefield of advice on mortgages

The combination of low interest rates and fierce competition between lenders has made it possible for borrowers to find cost-effective solutions.

But the uncertain financial backdrop means it can make sense to look for longer-term products that can provide security, suggests David Hollingworth, head of communications at mortgage broker London & Country.

"There are some very good deals around as the market is about as competitive as it's ever been," he says. "However, financial issues in the eurozone are causing lenders' costs to rise and in some cases they are passing these charges on in mortgage rates."

So what should you do?

Look at your current mortgage
The first step is to examine your existing mortgage. Most lenders will be sending out annual statements around this time, which will detail the amount you're paying, your outstanding balance and the length of time your existing deal has to run.

At the end of your agreed term, the amount you pay will revert to the lender's standard variable rate (SVR). Now it may be the case that this is very low, in which case it's not worth switching your mortgage unless you want a fixed rate product.

However, some SVRs can be as high as 6%.

For mortgage deals that have yet to expire you will need to see whether you'll have to pay an early redemption charge. If so, you must ensure that whatever new deal you consider still looks attractive even when these fees are taken into consideration.

Understand your options
The most important decision is choosing between the two main types of mortgage - interest-only
and capital and interest.

Opting for an interest-only mortgage - as the name suggests - means repayments will only cover the interest charged on the loan.

A separate investment vehicle will be needed to clear the sum itself.

In contrast, capital and interest mortgages have higher monthly repayments but every time a payment goes out of your account, you will know you are reducing the entire amount owed.

Fixed-rate or tracker?
Fixed-rate deals - where you pay a set amount each month for an agreed period - are ideal for people who like to know exactly how much the mortgage will cost for the next few years because it protects them against interest rate rises.

However, rates on trackers are often more attractive than fixed-rate products because you're agreeing to take on a higher degree of uncertainty. They suit those who believe interest rates are likely to either stay where they are or fall.

What deals are there?
The lowest rates are available to those with the largest amount of equity in their homes - which is expressed as loan to value (LTV). Therefore, while you can find 95% LTV deals, it will be much cheaper for those only needing a 50% or 60% LTV.

Currently it's possible to find five-year fixed rates of around 3.5%, although you can expect to pay an arrangement fee of almost £2000, while two-year fixed rates can be found for as low as 2.28% with similar charges applying, according to London & Country.

Two-year tracker deals are available from as low as 1.49% above the base rate for 65% LTV and a fee of around £1500. Many lenders offer the ability to switch from a tracker to a fixed-rate deal without incurring a repayment charge.

Be wary of fees
Deals may look very attractive at first glance but you must consider what charges will be levied as lenders are coming up with innovative ways of making money.

The biggest cost is usually the arrangement fee. These have been rising sharply over the past few years. While the cheapest will be around £500, you can easily be charged in excess of £2000. Exit fees will be often charged by lenders when you redeem your mortgage. Other fees include legal costs, early repayment charges, revaluing your property unless you accept the mortgage offer within an agreed period, and administration costs such as the telegraphic transfer of funds, which is around £35.

What's the conclusion?
Well, it all depends on your particular situation and attitude to risk, but Ray Boulger, senior technical manager at independent mortgage adviser John Charcol, believes that either a five-year fixed or a lifetime tracker make sense in the current economic climate. "People need to take a long-term view," he says. "Even though I expect the Bank of England's base rate to remain low until 2014, the premium you'll be charged for five years' security in a mortgage at a time when there are so many uncertainties is a pretty small price to pay."