There are several different types of mortages available and MoneyBright makes it simple to get to grips with each of the them! Here we explain the Tracker Rate Mortgage.

Tracker Rate Mortgages are so called because they track the Bank of England’s base rate. This means the rate of interest that you will be charged on your mortgage is the same as the Bank of England base rate plus an agreed difference. So, for example, your interest rate could be always 1% more than the base rate.

Tracker mortgages are commonly available to last two years, three years, five years or ten years, at the end of which your rate will normally become the lender’s standard variable rate. There are, of course, positive and negative elements to this.

Advantages

  • Your interest rate will be lower during the first few years of the mortgage, than the lender’s standard variable rate.
  • Any reductions made by the Bank of England to the base rate will mean your rate decreases too.

Disadvantages

  • Expensive early redemption penalties are sometimes applies to tracker mortgages.
  • If the Bank of England raises the base rate, your rate will increase too.
  • As rates vary, there is no consistency in the repayments, which means budgeting can be tricky!

All types of mortgage have their advantages and disadvantages and time spent ensuring you know exactly what you’re getting will certainly pay off!