BORROWERS will be offered cheaper mortgage rates this month as lenders launch January sales to boost business.

Ray Boulger of Charcol, a mortgage broker, said: “We expect the year to start with some very competitive deals flooding the market. Lenders will be competing hard to maintain their business in a slowing housing market.”

Last week, HSBC became the first bank to open on a bank holiday when it launched a January sale on a range of products, including mortgages. It is offering 25% off its standard one-year fixed rate of 5.29%, so you would pay 3.97%.

Many other lenders are expected to launch cheaper fixed and discounted rates in the coming months. Fixes are already at their lowest level relative to discounts for 18 months.

The cheapest two-year fix, from Portman building society, has a rate of 4.49%. The best discounted tracker, from Abbey, charges 4.44% — a gap of just 0.05 percentage points, the lowest since the summer of 2003.

But the slim gap makes it difficult for borrowers to choose between fixes and discounts, especially as expert opinion is divided on the direction of interest rates.

The Bank of England’s monetary policy committee (MPC), which sets the base rate, discussed a cut at its December meeting for the first time in more than a year.

However, 53% of economists polled by Reuters in December expected at least one more rise, with the base rate peaking at 5% or above in 2005, compared with a current level of 4.75%. But 47% said rates had already peaked, up from 40% in November. Some experts are even predicting base-rate cuts this year.

Halifax is forecasting a base rate of 4.25% by December; Capital Economics, a consultancy, believes it will be even lower at 4%.

Martin Ellis, chief economist at Halifax said: “Recent data — showing that overall economic growth has eased since the summer and that the housing market has weakened — have alleviated the pressure on the Bank of England to raise rates further. We think economic activity will continue to ease this year, with consumer spending and house-price growth both slowing. This should provide the Bank of England with scope to reduce rates by half a percentage point to 4.25%.”

Nationwide, on the other hand, believes rates will rise by another quarter point to 5% in the spring, staying at that level for the rest of the year.

Alex Bannister, the building society’s said: “There is still a risk that inflation will pick up because of higher energy prices. The labour market is also tight, which could force up wages. Consequently, we expect the MPC to raise rates again.”

Experts say that borrowers who fear there will be at least one more rise in the base rate should consider fixing, especially as there is very little difference between the cost of fixed and discounted deals.