Tracker Rate Mortgages
Tracker Rate Mortgages shouldn’t be confused with other variable rate deals, such as discounted mortgage or capped mortgages.
A tracker mortgage is based on another rate, usually the Bank of England Base Rate, plus a percentage above or below it. So, for example, if the Bank of England Base rate is say 1%, and your tracker is set at 1% above the Bank of England Base Rate, your payable mortgage rate would be 2%. If the base rate went up, the interest rate on your tracker mortgage would also rise.
Tracker rate mortgages are variable rate mortgages. Your monthly payments can go up or down, if the bank rate you’re linked to rises or falls.
When using a Tracker Rate, it’s important to budget correctly, as your payments can increase should the bank choose to increase its Base Rate. It’s impossible to predict movements in the base rate and some people prefer to know exactly what to expect going forward. In these cases, we normally recommend a fixed rate deal as opposed to a variable rate.
Tracker Rate Mortgages shouldn’t be confused with other variable rate deals, such as a discounted mortgage or capped mortgage. These rates tend to operate slightly differently. We’ll happily discuss these differences when you call.
The majority of Tracker Rate deals have what’s referred to as a floor. This is a point they will not go below. This means that your payments will not fall below a certain level. Equally, tracker rates generally have early redemption penalties. You’ll need to be aware of this if you’re thinking of repaying your mortgage early or even switching to another rate, such as a fixed rate.
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Lifetime tracker mortgages
Lifetime tracker mortgages do exactly what’s said on the can. A lifetime tracker mortgage is linked to the banks base rate for the lifetime of the loan. Normally tracker mortgages are linked to the base rate for a set number of years, two or three mostly. After which they revert to the lender’s standard variable rate.
One advantage of a lifetime tracker mortgage is that you don’t have to worry about when your tracker rates will end. They last for the full term of the mortgage.
Lifetime tracker mortgage rates tend to be higher than fixed term tracker rates. But, over the longer term they can be more effective, as there’s no need to keep changing deal, saving on time, fees and other costs.
There may be early repayment charges to pay if you decide to switch away from your lifetime tracker before your mortgage finishes or if you repay your loan early.
Top Tracker Mortgages
As with all mortgage advice and rates, a lot depends on personal circumstances.
The best tracker mortgages aren’t necessarily those with the lowest tracking rate. There’s a definite need to look at costs and associated fees. Professional advice is available from your broker if you’re unsure what tracker mortgage deal is for you.
Fixed or tracker mortgages?
The main difference between a fixed rate mortgage and a tracker rate mortgage is that with a fixed deal your monthly payments won’t change during the fixed rate period. But, with a tracker rate payments can go up and down.
Tracker mortgage rates are variable, they will rise if the bank rate you’re following goes up and they will fall when the bank lowers the rate you’re following.
With fixed rate mortgages, your rate is fixed for the term of the deal. Your monthly payments will remain the same regardless of what happens to the banks rate.