Most mortgage holders are being forced to subsidise the sweetheart deals offered by banks and building societies to win new customers, according to Consumer Choice magazine.

Its research also shows that slightly more than half (55.6 per cent) of new mortgage customers are opting for fixed rate mortgages, while 44.4 per cent take up the variable rate option.

At a time of low inflation, it suggests, mortgage holders would be wise to look to reducing the outstanding balance of their mortgage, either by making occasional lump sum payments or increasing monthly repayments. But it warns that in many cases, banks and building societies will impose hefty penalties for the early redemption of a mortgage.