Banks and building societies are increasingly trying to woo homeowners on to discount mortgages, but do they offer the best deal to the borrower?

These deals, which follow a lender's own standard variable rate (SVR), give banks and building societies more control over lending.

With a tracker loan deal, the interest rate moves up and down with the Bank of England base rate.

As the base rate fell to a low of 0.5%, lenders which offered low-cost trackers were left with a headache.

Lenders faced the scenario of thousands of customers paying almost nothing for their mortgages.

This stretched the banks' finances, so they were unable to lend cheaply to new customers. With discount deals mortgage companies have more power, as they decide on how much to charge.

HSBC's all-time low rate of 1.99% was a discount mortgage of 1.95 percentage points discount off its SVR of 3.94%.

The bank estimates it was lending £10m-a-day to homeowners who'd applied for this deal - about £400m in total.

There are still some good discount deals. HSBC has a two-year deal starting at 2.99% (a discount of 0.95 points off its SVR) for those with a 25% deposit.

The HSBC mortgage deal has no arrangement fee and initial repayments on a typical £150,000 mortgage deal would be £711 a month.

If rates stayed the same, the cost over two years would be £17,064.

Halifax is offering existing customers whose current deal is ending a rate of 2.99%, which is a 0.51 point discount.

New customers with a 25% deposit can get the deal which has a £599 fee. The total cost is £17,663.

Melton Mowbray BS has the same starting rate, a 2 percentage point discount off its SVR, for the same deposit, but its fee is £100 cheaper. The total cost on this is £17,563.

A deal good for your mortgage company can be bad for you. If the base rate rises, your rate could rise by more.

London & Country has a deal with Alliance & Leicester of a tracker at 1.99% over base rate for two years, giving initial repayments of £672.

You need a 30% deposit and there is a £1,995 fee. Total repayments would be £18,123.
Source: thisismoney.co.uk