Homeowners looking to limit the effects of rising mortgage rates should switch their focus from fixed-rates to discount-rates, according to mortgage firm mform.co.uk.

They found the average true cost of the 10 best two-year discount deals is £1,697 lower than the average true cost of the 10 best two-year fixed deals - around £70 a month.

A borrower would pay an average £16,526 over two years in a top 10 discount deal compared with £18,223 in a fixed deal, mform.co.uk figures show.

The true cost of the top 10 discount deals over two years ranges for a £150,000 loan from £12,796 to £17,694 compared to a range of £15,095 to £18,939 for two-year fixed deals.

Council of Mortgage Lenders figures showed that in May nearly 80 per cent of mortgages taken out were fixed rates as borrowers reacted to rate rises.

However mform.co.uk, which allows customers to compare mortgages based on the true cost including rate, fees and other features, says its customers are now choosing variable rate products.

Only 42 per cent of customers applying for mortgages on its site in July chose fixed rates, while 58 per cent selected variable deals.

Francis Ghiloni, mform.co.uk marketing and business development director, said: "Recently mortgage customers have understandably gone for certainty in the face of rate rises and that has meant fixed rates have dominated the market. But in July we have seen the trend reversed when customers have seen the true costs involved.

"People who simply look at fixed rates to the exclusion of everything else are missing out on potentially good deals. The fixation with fixed rates is not necessarily healthy.

"Discount rates presently offer good value and also enable borrowers to benefit if rates start to come down next year as some commentators are predicting."

The current best deal rated on true cost is Barnsley Building Society's discounted variable rate of 4.24 per cent.

Over two years on a £150,000 loan a borrower would repay £12,796 or £530 a month with a fee of £76.50.

Norwich & Peterborough's 4.79 per cent deal would cost £14,470 over two years at £598.75 a month and with a £100 fee.

The best two-year fixed rate is Norwich & Peterborough's 4.84 per cent which would cost £15,095 over two years at £605 a month and include £575 in fees.

Skipton offers a 5.39 per cent rate which costs £17,769 over two years at £673.75 a month and includes £1,599 in fees.