Tracker Rate Mortgages Explained

Tracker Rate Mortgage

Tracker rate mortgage schemes follow movement in the Bank of England base rate at an agreed differential.

The Tracker rate mortgage is available for a fixed period or the life time of the loan. The most common tracker rate period is 2 years, though mortgage lenders now offer 3 year, 5 year and even 10 year track rate mortgages.

If the tracker rate is for a set period of time the mortgage will revert to the lenders standard variable rate at the end of the tracker rate period.

Pros and Cons of Tracker rate mortgages

Pros

Lower interest rate in the first few years then the lenders standard variable.
You will benefit from all reductions in the Bank of England's base rate.

Cons

Early redemption penalties can be onerous and expensive and may apply.
If the Bank of England base rate increases your monthly payments will rise in line with it.
It is less easy to budget as the interest rate might vary.

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP
REPAYMENTS ON YOUR MORTGAGE

Think carefully before securing other debts against your home, your home may be repossessed if you do not keep up repayments on your mortgage.

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