What is a tracker mortgage?A tracker mortgage mirrors the Bank of England Base Rate, unlike a discounted rate mortgage which follows the lenders standard variable rate. This means a tracker rate mortgage will reflect changes in the Bank of England Base Rate, usually from the month after any change, whereas those on a discounted rate will only see a change if the lender decides to adjust their standard variable rate.
The current Base Rate has been low for nearly six years. This means that borrowers are enjoying a period of low interest, and there are some great tracker mortgage deals available. However if the Bank of England does choose to raise the Base Rate it will mean that your payments go up too.
The tracker interest rate you pay is an agreed percentage above or below the Bank of England’s Base Rate. As the Base Rate rises and falls, your tracker will track these changes, and so rise and fall accordingly. This will affect your monthly repayments. Some trackers do have a ‘floor’ on them meaning they will not go below a set level regardless of how low the Base Rate drops.
No one knows when the Bank of England is likely to make changes, so it is good to be aware of what is happening in the wider economy if you are on this type of mortgage. Subscribing to our newsletter or following us on Twitter and Facebook will help you keep up to date.
Should Base Rate rise you can select to move to another rate, but early repayment charges may be payable
Lifetime trackersLifetime tracker mortgages are linked to the Base Rate for the lifetime of the loan. Therefore you do not have to worry about coming to the end of a deal (like on a fixed or short term discounted Rate) and having to switch lenders or refinance, and all of the costs that go along with that change. Whilst the lifetime trackers are usually a slightly higher rate than the short term trackers, not having to switch every few years can mean they could work out more cost effective in the long term.
Contact London and Country today for advice on the best tracker deals and if they are a suitable options for your mortgage.