Two year fixed rate mortgages deals are being avoided by borrowers as the rising cost of mortgage payments means that even the most credit worthy of borrowers are now having to pay thousands of pounds over the next few years.

Recently The Times newspaper had some figures drawn up that showed that even a borrower who has 25 per cent equity in their home (and a £150,000 mortgage) with Halifax will have to pay more than £3,300 extra over two years even if they choose their lowest-rate two-year fixed rate available.

It is a fact that all banks are offering less generous deals these days, rising interest rates and a tightening of mortgage deals (caused by the credit crunch) resulting in less choice and higher rates.

Experts are saying that this is prompting many of the 1.4 million homeowners coming to the end of their fixed-rate deals to look either at longer fixes or loans that move in line with the base rate.

Ray Boulger, of John Charcol, the mortgage broker, is reported to have said: “Two-year fixes will be less popular as arguments for not taking one out outweigh those in favour. People will want to wait until the credit crunch subsides and interest rates fall further.”

Mortgage rates have not fallen as much as they should have done (the lenders have not passed on the benefits of lower bank rates), and to add insult to injury mortgage arrangement fees have risen sharply over the last few months

Two years ago, it cost just £400 to set up a two-year fixed-rate deal, now an arrangement fee of £1,000 plus is not that unusual.

Examples are: First Direct offers a two-year fix at 4.75 per cent, with a fee of £1,498, whilst Alliance & Leicester's two-year fix pegged at 4.99 per cent has an arrangement fee of 2% of the mortgage, thus a homeowner with a home loan of £320,000 will pay a fee of £6,400.

In fact a record proportion of borrowers took out tracker deals in January, according to the most recent figures from the Council of Mortgage Lenders, a third of mortgage deals were trackers, the highest figure since 2005. The number of fixed-rate deals slumped to 57 per cent, down from 64 per cent in December.

David Hollingworth, of London & Country, the mortgage broker, has said: “Longer-term mortgages are potentially a viable solution, and we could see the popularity of two-year fixes wane.” Arrangement fees and interest rates on three and five year fixed rate deals are often similar to two year deals, so for those who require more guaranteed stability, the five year deals are becoming more attractive.

“Five-year fixed rates are becoming a lot more popular. This tends to be a good compromise, as borrowers are not tied in for too long.” said Louise Cuming, of Moneysupermarket.com.