AS the three main parties discuss coalition deals in the wake of the hung Parliament result, the item high on their agenda will be how to tackle the £163bn budget deficit.

Millions of households face a similar squeeze, with pay freezes on salaries expected this year in both public and private sectors.

In an attempt to save money, many people will be keen to control their monthly mortgage repayment – a major source of regular expenditure.

When it comes to mortgages, the election may have marked a sea change. Variable- rate (SVR) mortgages have had a great run for the past 18 months, accounting for 84 per cent of loans arranged in March by broker John Charcol, but the fixedrate mortgage is poised for a comeback.

At some stage, the Bank of England base rate is likely to rise from its historic low of 0.5 per cent, which will push up tracker loans linked to that figure. A fix is an obvious defence against rises later this year, or early next year.

For the moment, the best news for homebuyers is that mortgage rates fell in the early part of this year.

At First Direct, which cut its five-year fix in mid-April from 4.69 per cent to 4.54 per cent and halved the fee from £499 to £249, senior product manager Richard Tolchard said: “We introduced our fiveyear fixed-rate repayment mortgage in response to requests for a product which would offer the peace of mind of fixed repayments after the election, and we are pleased to sweeten the deal by reducing fees.”

Keen to revive the market, rival lenders are following suit. Despite last month’s increase in inflation, five-year fixes have touched their lowest levels in six years.

Michelle Slade, at Moneyfacts.co.uk, said: “Mortgage rates which peaked in August last year have fallen back steadily since then. Today, the average two-year fixed-rate mortgage – the barometer of the mortgage market – stands at its lowest in 12 months, with average three and fiveyear fixes not far behind.

“Lenders are more active in the mortgage market, which is welcome for borrowers as increased competition is one of the overriding factors driving rates downwards.”

Hannah Mercedes- Skenfield, at Moneysupermarket. com, said: “Average fixed rates across the board have reached their lowest levels since 2007.

“Since April 2008, the average rate for two-year fixedrate deals has fallen significantly by 3.36 per cent, with rates at a current low of 4.62 per cent. That cuts the fixed repayment on a £150,000 mortgage by £316 to £853.”

Many borrowers face a dilemma – do they stick with a tracker loan, ridiculously cheap on the back of the low Bank of England base rate, or do they fix to guard against what lies around the corner?

That is probably why HSBC, a high street bank which has increased its share of the mortgage market through the credit crunch, has launched the split-loan mortgage, a concept already proven in Australia, New Zealand and Canada.

It allows borrowers to fix the rate on 25 per cent, 50 per cent or 75 per cent of the loan for two years, while the rest of the loan is on a lifetime tracker.

The smaller the proportion of the loan which is fixed, the cheaper the (same) rate charged on both parts of the mortgage. The cheapest, at 2.49 per cent, assumes 25 per cent of the mortgage as fixed and 75 per cent as a tracker, with a loan-to-value (LTV) limit of 70 per cent.

If 75 per cent of the mortgage is fixed, and 25 per cent is taken on tracker terms, the rate is 3.89 per cent, with an LTV of 80 per cent. All other combinations are charged at a rate between those two figures.

There is one other point to remember about the split loan mortgage – don’t ask a broker, because HSBC only deals direct with mortgage applicants.

There are, of course, other precautions which prudent borrowers might take at times of great economic uncertainty.

One obvious move is to take advantage of low mortgage rates by overpaying part of the home loan – ensuring the loan is smaller when rates rise.

Here, the horse may have bolted. Unbiased.co.uk, the professional advice website, says more than two thirds of borrowers on cheap trackers chose not to overpay when rates plunged in 2008-9.

For those borrowers keen to overpay, the freedom to do so without penalty is usually greater on trackers – Lloyds TSB, for example which prides itself on the flexibility of its loans, allows a 20 per cent overpayment on trackers, but only ten per cent on fixed rate loans.