Tracker Mortgages Explained
In essence a tracker is very similar to a standard variable rate mortgage, except for the fact that it has a variable rate of interest that directly tracks the Bank of England base rate. In reality this means that the rate you pay will tend to fluctuate over the mortgage’s lifetime. In order to explain Tracker mortgages, it is pertinent to account for the advantages and disadvantages:
- You may pay a low interest rate if the Bank of England base rate is on the decrease
- The interest rate may begin at a low level for the initial few years before the lender switches the interest rate to the standard variable rate that they determine by comparing it against the base rate of the Bank of England
- Some Tracker mortgage deals may subject you to early redemption penalties
- You may be expected to pay a higher rate of interest if the Bank of England base rate increases
- You may not be able plan for your future finances because the interest rate varies considerably
The minimum term for a Tracker mortgage deal is usually 2 years and you may rely on a low base rate throughout this period and that your lender’s standard variable rate will remain low for the duration of the interest rate term. It may be necessary to seek financial advice from a professional mortgage advisor if you need Tracker mortgages explained in further detail. Once you have chosen the type of Tracker mortgage deal that is right for you, you may need to choose your preferred method of repayment:
Repayment – monthly interest payments on top of mortgage repayments guarantees that you are able to repay your whole loan within the interest rate term.
Interest Only – you may be required to make monthly payments that consist of the interest you owe over the course of a month and you may also need to make separate payments into an ISA to repay your mortgage loan to your lender upon maturity.
See the table above for a selected range of tracker mortgage deals from a number of different providers - alternatively call our independent mortgage team on 0117 332 6063 for advice on your options.