THERE was good news for hundreds of thousands of borrowers coming off cheap two-year fixes last week, as brokers said the cost of new fixed deals was heading down.

While the Bank of England kept interest rates on hold at 5.5%, most economists believe there will be at least two quarter-point cuts to 5% this year.

This makes tracker mortgages appealing because borrowers are guaranteed to benefit in full from any rate falls. Many borrowers prefer fixes, though and these, too, are expected to get cheaper in the coming weeks. The cost of two-year funds has fallen below 5% for the first time since last May, but most two-year deals are still significantly higher – giving lenders scope to reduce their prices.

Last week Leeds, Skipton and Norwich & Peterborough building societies all reduced some of their fixes. Leeds offers one of the best two-year deals at 5.25%, though it is only available for loans up to £250,000. The arrangement fee is £999. The other leading two-year fix is from First Direct at 4.99%. This is available on loans up to £300,000, with a fee of £1,498. It offers free legal work for remortgages.

Ray Boulger at John Charcol, a broker, said: “At the moment I think trackers are looking better value than fixes, although I think there will soon be more deals below the 5% mark.”

If you need a mortgage now, Boulger suggests a lifetime tracker as most are penalty free. So you can move over to a fix, if and when they get cheaper. Hinckley & Rugby building society has the best deal at 0.24 points above Bank rate, giving a current pay rate of 5.74%. The fee is £795 and it is available for loans up to 80% of the property’s value with a maximum of £300,000.

Alternatively, Lloyds TSB Scotland has a product available through selected brokers that is 0.38 above Bank rate, giving a current pay rate of 5.88%. It is available for loans up to £1m.

If you are simply looking for the cheapest tracker deal, Cooperative Bank has a two-year scheme at 0.01 points below Bank rate.