With talk of financial uncertainty and recession all around, it is not the ideal time to have to make decisions that will affect your financial future. But if your mortgage is coming to the end of its tie in period, or you are considering purchasing a new home, you have a decision to make.

You are essentially left with three basic options, either allow your mortgage to slip on to your lenders standard variable rate (SVR), switch to a fixed deal or switch to a tracker deal. There are also some other options and more specialist products, but for most regular mortgage holders this will be the basic decision they will have to face.

So let's look at each option in more details.

Fixed rate mortgages:

These involve the interest rate you are charged on your mortgage being fixed for a specified period, typically 2, 3 or 5 years, although other variations do exist. You will typically be tied in to the mortgage for that period, there being an early repayment charge (ERC) should you wish to repay the mortgage early.

This form of mortgage comes with the benefit of knowing exactly what your payments will be each month therefore enabling you to budget. Should the Bank of England increase its _base_ rate, it makes no difference to your payments. However, should rates fall, you won't feel the benefit either.

Fixed rates on the current market will vary wildly, as do the fees involved, specifically varying as the loan to value (LTV) changes, with the best rates reserved for those borrowing up to 60% of the value of their home. Typical rates vary from as low as 3.19% for a 2 year deal at 60% LTV to 6.29% for a 5 year deal at 90% LTV.

Tracker rate mortgages:

These mortgages are _link_ed to an underlying public interest rate, typically the Bank of England _base_ rate, and will rise and fall, tracking the movements of the associated rate. Like the fixed rates, these will typically track the _base_ rate for a specified period of time and again often come with a tie in period. There are also _base_ rate trackers known as term trackers which will track the _base_ rate for the entire term of the mortgage without a tie in for the entire period.

Tracker rates have the benefit of dropping should the _base_ rate fall, therefore reducing your monthly payments, but come with the risk of increasing should the _base_ rate rise. However some tracker rates come with a collar, which is a floor level to which the pay rate will not go below.

Tracker rates will also differ considerably depending on loan to value. The best current rates vary from 3.04% (2.04% over _base_) for a 2 yr tracker at 60% LTV to 4.49% (3.49% above _base_) at 85% LTV. Two years ago tracker rates could be obtained as low as 0.12% above the _base_ rate, as lenders did not expect the _base_ rate to fall in the manner which it has, which demonstrates the increase in margins for tracker rates over the recent months.

Standard Variable Rates (SVR):

This is the rate chosen by each particular lender as their standard rate for mortgage loans. This will generally move somewhat in line with the _base_ rate, however there is no guarantee that it will move. This is typically what a fixed or tracker rate will revert to upon the expiration of the deal. If you are on a SVR you will usually not have an early repayment charge or any tie in with the lender, leaving you free to opt for a new deal should you wish. In the current climate, many people are staying on this rate at is more competitive than they can find elsewhere and leaves them able to switch to another deal at any time in the future should a competitive option come along.

There are also options that attempt to give you the best of both options. The products known as "drop and lock" mortgages allow you to take a tracker mortgage with the option to switch to any of the lenders fixed rates at any time without paying an ERC. For example a tracker rate of 3.69% for 3 years with the option to switch to a fixed at any time. This particular product is available up to 60% LTV, but the fees with it are over £2000 which may put some borrowers off.

So how do you decide which one suits you? This really depends on your circumstance and preferences. As explained above, you have certainty with fixed rates enabling you to budget for your monthly payments, whilst you have uncertainty and risk with tracker rates alongside potential benefits. If you are in a situation where you quite simply can't afford an increase in your payments, then a fixed rate is probably the best option. Likewise if your mortgage payments represent a small proportion of your disposable income and you are prefer the potential upside of lower payments, a tracker may be more appropriate.

When considering your options, it is also worth looking at the potential for gain and benefit with the tracker option. The most that rates could possibly drop would be a further 1%, as the _base_ rate is currently at 1% and can't be a negative figure. However nobody can predict how the _base_ rate will change over the next few years, and the extent to which rates can increase is far greater than the potential for them to fall. That said, tracker rates are usually lower than fixed rates, therefore meaning that it would take an increase in the _base_ rate before you would be paying the same rate as that of a fixed rate.

Certain situations lend themselves to particular rates. Lets assume a first time buyer (FTB) purchasing a new home at 85% loan to value. FTB's typically tend to borrow more in terms of income multiples than those with a foot already on the property ladder. In that case, they may be stretching themselves slightly further in terms of affordability each month, so I fixed rate may be a safer option. In terms of how long to fix for, your opinion on whether house prices will continue to fall could influence you. If you purchase a home at 85% LTV and property prices fall 10% over the next 2 years, you could find yourself coming out of a fixed deal to find that your LTV has increased and you can't move your mortgage, therefore being left stranded on your lenders SVR. So with this in mind a longer fixed rate of perhaps 5 years could be more appropriate as it could allow you to avoid some of the consequences of any initial downswing in property prices.

Overall, the decision of which is the best option really does depend on an individuals circumstances. If you are having trouble deciding for yourself, speak to an expert such as a mortgage broker who will be able to go through your options and help you come to a decision.