What is a tracker mortgage?
A tracker mortgage as the name implies tracks the Bank of England base rate and is a type of variable rate mortgage. This means that if the BOE base rate goes up then so does the cost of your mortgage, and likewise if the base rate goes down then so does the cost of your mortgage.
Tracker mortgage products will track the base rate by a set percentage. For example your lender may charge you 1 or 2% above the prevailing base rate.
What are the rates offered?
The actual percentage amount you are charged will usually be dictated by the amount of security provided to the lender. The higher the LTV (loan to value) figure, e.g. 95% the more interest you are likely to be charged, and the lower LTV (e.g. 60%) the less interest you will be charged.
The best tracker deals are reserved for borrowers with high amounts of equity within their home, and therefore offer less risk to the lender.
How long does a tracker mortgage last for?
Tracker mortgages can last for as little as one year or may run for the lifetime of the mortgage. After you tracker deal expires then you will automatically be placed on your lenders Standard Variable Rate (SVR) deal which is likely to charge a higher rate of interest.
Tracker rate mortgage vs a fixed rate deal?
With historically low interest rates like we are currently experiencing a tracker mortgage can be a good deal.
What are the drawbacks?
Unlike a fixed rate mortgage the cost of a tracker mortgage can go up or down depending on interest rates.
If we were to experience a sudden rise in interest rates then this would increase the cost of your mortgage and may have a negative impact on your finances if you have a tight budget.
What deals are in the market place?
Every mortgage lender in the UK has a range of tracker mortgages to choose from. Using the mortgage search and find facility here on the website will display the hundreds of tracker mortgage deals available from the whole UK market place.
How can I get further mortgage advice?
For advice speak to a mortgage expert here on the website. Our advice is free and we’ll provide you with choice and options from the whole UK mortgage market place.