Head of Content
Mortgage Advisor & Director
What are tracker rate mortgages?
A tracker rate mortgage is a type of variable mortgage that follows a fixed economic indicator - typically the Bank of England base rate.
Depending on the mortgage deal, the interest rate will track the base rate plus an agreed fixed percentage. As the interest rate can go up and down, your mortgage repayments can increase and decrease accordingly.
How do tracker rate mortgages work?
The Bank of England base rate is currently at a record low level of 0.1% as of March 2020.
With a tracker mortgage, a fixed percentage will be added on, generally between 1.2%-2%. If the BoE base rate increases, so will your mortgage interest rate and monthly repayments.
What the benefits of tracker rate mortgages?
With record-low interest rates, tracker rate mortgages can offer a great deal, especially if you are considering moving home in the next 1-2 years.
What are the disadvantages of tracker rate mortgages?
A tracker rate mortgage means that your payments are subject to change, and many people are happier with fixed monthly payments to help with budgeting. If interest rates increase, you will not benefit from the protection offered by a fixed-rate mortgage.
You are entering a fixed-term for tracking, typically two years, however, you can find deals lasting the duration of the mortgage. As with most fixed-rate deals, if you amend the agreement early, you will be subject to early repayment charges.
Which lenders offer tracker rate mortgages?
Almost all lenders offer tracker rate mortgages, as the second most popular type of mortgage.
What should I watch out for?
Most tracker mortgages track either the Bank of England base rate or the LIBOR rate, however, watch out for deals that mention other deals as they may be referencing rates that are within the control of the lender.
Another point to look out for is the reasons permitted to warrant a rate change. The mortgage interest rate should only change when the reference rate changes; no other causes should be included in the agreement.
Where can I find more information?
As a whole-of-market mortgage advice service, our experienced team of advisors have access to deals not available to the general public, and have helped thousands of customers to find their perfect mortgage. Complete our simple online form today to get started!
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
