Quick Tracker Mortgage Enquiry

Tracker Mortgage

Your home may be repossessed if you do not keep up repayments on your mortgage.

The interest rate on a tracker mortgage is linked to the Bank of England base rate. If the base rate changes, your mortgage rate will also change. Tracker rates can be set for an introductory period (typically 2, 3 or 5 years) or it could be a lifetime tracker which means that you will be on a tracker rate for the whole mortgage term.

If you are on an introductory tracker rate, your mortgage will usually go onto a Standard Variable Rate or another (usually higher) tracker rate at the end of the initial term. You could also go onto a tracker rate once your fixed rate mortgage deal has ended.

Over the last few years, interest rates have been historically low, and so those who have been on a tracker mortgage have saved money compared to those on a fixed rate mortgage. However, there have been times in the past where interest rates have risen sharply and homeowners have been unable to meet their mortgage repayments.

How does a tracker mortgage work?

If the Bank of England base rate is at 0.50%, and you took a tracker mortgage with a rate that is 2% above the base rate you will be paying an interest rate of 2.50%

If the Bank of England put the base rate up to 1%, your mortgage rate would increase to 3.00%.

This would add about £25 a month to the repayments on a £100,000 mortgage. As with fixed rate mortgages, trackers are available over different terms: most commonly 2 or 5 years. With these deals, you’ll be charged a penalty if you want to get out of the mortgage during the term. You can also get lifetime, or term, tracker mortgages and these are often completely penalty-free so they are very flexible and can be a great option if you don’t want to be tied into your mortgage.

However, if money is tight and you need to budget carefully, a fixed rate mortgage will probably be a better option for you.

At Derngate Wealth in Northampton, we can help you work out what your repayments will be compared to a fixed rate mortgage, and help you understand what a rate rise would mean to you each month.

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