Borrowers coming up to remortgage have been urged to snap up a good deal while they still can, amid warnings that the cost of home loans is set to soar again.

Some of Britain's biggest lenders, including Abbey and Nationwide, trimmed rates last week. However, that was before the Bank of England said on Thursday that inflation could jump to 3.7% by the end of the year, and indicated that it would be more cautious in cutting interest rates.

The inflation report sent rates in the wholesale markets soaring, suggesting rates on offer to homeowners would also head up, at least in the short term.

Nationwide, the biggest building society, was the first to move last week, lowering its five-year fix by 0.30 percentage points to 5.95% and bringing the monthly cost of a £200,000 home loan down by £37 to £1,282.

The society made the announcement last Tuesday, before the Bank released its prediction following a worrying rise in prices.

Nationwide also cut its headline two-year fix, albeit by just 0.15 points to 6.15%, with repayments on a £200,000 loan now £1,307.

Abbey, which has trebled its market share during the credit crunch, followed suit by cutting its trackers by 0.05 points and its five-year fix by 0.17 points to 5.75%. Only “good” borrowers with a 25% deposit or equity in their home will benefit from this rate, though.

Ray Boulger of Charcol, a broker, said: “All lenders, including Nationwide, Abbey and RBS, had access to cheap funds a fortnight ago after wholesale borrowing costs began to ease. We saw cheaper deals last week as a result. But we've seen unprecedented demand for these deals and it's unlikely that they will last until the end of the week.”

Swap rates - which lenders use to fund their fixed-rate deals - leapt to 5.75% last week; they were 5.24% a week earlier.

Boulger said: “Fixed-rate mortgages were tipped to fall as long as there were expectations that the Bank would cut interest rates. There is much less reason to expect this now. The new rates are out of step with the market. They won't last long.”

Darren Cook, of Moneyfacts, the financial-data firm, also said he expected rates to rise. “Over the past five days we have seen a swap-rates increase by over a third of a percent. It will only be a short while before we see these rate increases filter through to the high street,” he said. We look at the future for rates and the best mortgage deals.

What is likely to happen with interest rates?

Last week's data suggest the Bank may be more reluctant to cut rates - bad news for existing homeowners with tracker mortgages and for future homebuyers who were hoping fixed-rate mortgages would come down.

The figures are a big departure from a month ago when the market predicted Bank rate would fall to 4% or less by the end of 2009.

However, some economists are more optimistic than the markets. Most forecast at least one more quarter-point rate-cut before the end of the year. This would take the bank rate to 4.75%. However, the money markets, which reflect City expectations, are forecasting a rate of 4.98% in November.

So should I go for a fix or tracker?

The best fix on offer is from Woolwich at 5.49% for borrowers with a 40% deposit. On a £200,000 loan, repayments work out at £1,226 a month. The best tracker is from Principality at 5.75% for borrowers with a 25% deposit or equity in their home. On a £200,000, loan repayments on the Principality deal work out at £1,258 or £1,228 if there is another cut to official rates by the end of the year, so you would be slightly better off with a fix.

My deal doesn't end until the autumn. What should I do?

Nationwide and Abbey will let you book a rate six months in advance. However, you should check the end date on the term.

Abbey's two-year deals end in August 2010, so if your current deal expires after August this month you may not get the benefit of the full two years on the advertised rate. Those two months could add £334 to the cost of a £200,00 loan if you default to their current standard variable rate (SVR) at 7.09%.

Nationwide's deals apply for two years from the date of completion.

Long-term fixes look good value don't they?

Yes, but Boulger advises borrowers not to lock into a deal lasting more than three years. He said: “Within three years the credit crunch will have eased considerably so mortgage rates will have come down.”

Samantha Unwin and Michael Dolan of Northolt, north-west London, locked into a three-year, fixed-rate mortgage with Abbey at 5.72% this month. Their current deal, a two-year fix from Principality building society at 4.85%, ends in July.

They will pay £67 more a month on their mortgage of about £130,000 on a £185,000 maisonette.

Samantha, 33, a box-office manager, and Michael, 34, a trade-union worker, took the deal as they recently had their first baby, Joe.

‘We wanted a fixed-rate deal because with having the baby we need certainty,’ she said.