Once you decide on the type of mortgage you want, you must choose what rate to go for. Your choice depends on your circumstances and attitude to risk.

Avoiding the standard variable rate Each mortgage lender has a standard variable rate (SVR). This is its benchmark, which it uses to calculate all its mortgage deals. The SVR can move up and down with no notice at all: When the Bank of England raises or cuts the base rate - the base interest rate, which it increases or decreases when it thinks this is necessary for the economy - most lenders adjust their SVR accordingly within minutes. You can take out a mortgage on your lender's SVR but it won't be the cheapest deal. Opt for a fixed or discounted rate instead - they're usually a couple of percentage points below the SVR. Even if you opt for a fixed or discounted rate, don't forget about the SVR as your mortgage reverts to this once the offer period comes to an end - unless you switch to another deal. If you stay put, your mortgage repayments could dramatically increase so shop around for another deal.

Opting for a fix With a fixed-rate mortgage your repayments are guaranteed for a set period of time, no matter what happens to the base rate. A fixed rate provides certainty: Most people opt for a two-, three-, or five-year fix but you can also fix for one, 10, 15, 20, 25, 30 or even 40 years. Make sure you are comfortable with the length of your fix, because if you want to move house and switch your mortgage before the term is up, you could pay a penalty. With a fixed rate, if the base rate rises you're laughing but if it falls you don't benefit. And if the base rate falls several times during your fixed term, you could end up paying a lot more than you would have done if you'd opted for a shorter fix. The longer the fixed rate, the higher the rate of interest: two-year fixes are cheaper than five-year deals because the lender is taking on less risk.

Plumping for a discount Discount rates tend to be a couple of percentage points below the lender's SVR. Lenders usually offer discount rates over two, three, or five years: As with fixed rates, generally the shorter the term, the lower the rate. The big advantage of discounts is that they are also usually lower than the lender's fixed-rate deals - at least initially. You also benefit from any cut in the base rate if interest is calculated daily on your mortgage because it is directly linked to your lender's SVR. Here lies the problem: If the Bank of England increases the base rate, your mortgage payments increase. And if there is a lot of volatility in the base rate, your mortgage payments could fluctuate dramatically from month to month, making budgeting difficult. Opt for a discount rate only if you can afford to be wrong; in other words, if you can cope with an increase in your mortgage repayments. If you can, you'll get a better deal than on a fixed rate - at least initially - plus you benefit from any cuts in the base rate during the discounted period.

Checking out capped rates With a capped rate, you know the absolute maximum you have to pay each month, just as you do with a fixed rate. However, as there is no lower cap, you could end up paying less interest than you would on a fixed-rate deal, depending on what happens to the base rate. Your initial mortgage rate is set lower than the cap: It can rise but only as high as the cap. If the base rate is raised again after the cap has been reached, your mortgage repayments won't be affected. Capped rate deals are usually offered over three, five or 10 years. Because the rate is capped rather than fixed, it can fall, allowing you to take advantage of cuts in the base rate. This makes a capped rate attractive because you can benefit from the best of both worlds. Capped rates tend to be higher than fixed-rate deals. There is also less choice as fewer lenders offer them.

Tracking the base rate A base rate tracker mortgage follows movements in the base rate, tracking a margin of, say, 1 per cent above it. So if the base rate is 4.75 per cent, the interest rate on such a tracker is 5.75 per cent - until the base rate changes. The big advantage is that your lender can't widen the margin and charge you more than this set margin above the base rate, so you know where you stand. Many lenders offer substantial discounts on tracker deals for six months or more as an incentive. So you could be offered 1 per cent off the base rate, giving you a very attractive payable rate of 3.75 per cent if the base rate is 4.75 per cent. And if you opt for a short-term tracker there might be no penalty to pay at any time so you can switch to another deal without charge when the discount period comes to an end. As with a variable deal, tracker mortgages go up and down - there is no certainty. And as they usually track above the base rate, you will pay more than if you'd opted for a fixed or discounted deal. You may be better off opting for a fixed or discounted rate instead.