BORROWERS will be encouraged to fix their mortgage rates for up to 25 years following the publication of a government report into the home-loan market this week.

Long-term fixed rates are unpopular because they tend to be more expensive than deals of five years or less. The best 25-year fix has a rate of 5.78%; the lowest two-year fix costs just 4.19%.

But some experts still think the current batch of long-term fixes are worthwhile to protect against future rate rises.

John Wriglesworth, an expert on the housing market, is keen on deals of more than five years.

He said: “The base rate is at its lowest level for 50 years, so now is a good time to insure against future rate rises. A premium of between one and one and a half percentage points could be a small price to pay.”

Most economists think the base rate will rise from its current level of 3.75% to between 4.25% and 5% over the next few years. George Buckley of Deutsche Bank predicts the rate will average about 4.5% over the next 10 years.

Since 1984, the difference between the base rate and the typical standard variable rate has averaged 1.3 points. Mortgage rates might, therefore, average 5.8% over the next decade.

Marsden building society has a 10-year fixed rate of 5.39%, while Mercantile building society offers a loan fixed at 4.99% until December 1, 2008. If standard mortgage rates were 5.8%, these deals would offer decent value.

The best 25-year fixed mortgage on the market, from Cheshire building society, has a rate of 5.78%. However, fewer than 200 borrowers have signed up for the deal.

Mortgage brokers are reluctant to recommend longer-term deals because the monthly costs are much higher when compared with shorter schemes.

The cheapest two-year fix, from Britannia, costs just 4.19%. A homeowner with a £100,000 interest-only mortgage would pay an extra £1,590 a year on the 25-year deal.

But borrowers should beware the costs of constantly switching to the best short-term deal on the market.

A borrower who remortgages every two years over the next decade could pay £3,750 in costs, assuming an arrangement fee of £250 and legal and valuation costs of £500. However, a borrower who took out a 10-year fixed deal would face one-off costs of £750 — a saving of £3,000 before any benefit if interest rates rise.

Borrowers are also put off long-term fixes by high redemption penalties on some deals. Cheshire has an exit charge in the first 20 years of its 25-year scheme, although there are some penalty-free periods.

After the sixth year, and every other year after that, borrowers are given a three-month window in which they can quit without charge.

David Hollingworth of London & Country, a mortgage broker, said: “Even if you are prepared to shoulder the extra costs of long fixes, they limit your flexibility.

“If you move house and need extra funds, you may be tied to your existing lender — unless you pay the penalty — and there is no guarantee that it will let you borrow more at a decent rate. But if you are unlikely to move over the next 10 years, I would be happy to recommend a long-term deal.”

If you opt for the 10-year Marsden mortgage, the penalty is 5% of the initial loan in the first seven years, falling to 2% in the final year.

You need a big deposit to get the best rates. Mercantile insists that you put down 25% for its five-year fix. The minimum deposit for Marsden’s 10-year loan is 20%.

Norwich & Peterborough building society charges 5.48% for 10 years if you have a smaller 5% deposit.