Tracker Rate Mortgages FAQ
What is a tracker rate mortgage?
A tracker rate mortgage is a mortgage with an interest rate which moves in line with Bank of England base rate. The interest rate is set at a percentage above or below Bank base rate and increases or decreases accordingly for the duration of your deal.
What are the benefits of tracker rate mortgages?
The biggest benefit of a track rate mortgage is if interest rates fall your mortgage rate will fall too, making monthly repayments cheaper. Furthermore, some lenders will allow you to make overpayments on a tracker mortgage without any charges. This means if your monthly repayments fall you could use the money you're saving to overpay on your mortgage, thus clearing it faster.
Are there any downsides to tracker rate mortgages?
If interest rates rise your mortgage rate will rise too, meaning a mortgage that was affordable can suddenly become expensive. It's important to factor in potential rate rises when working out whether you can afford a mortgage.
What type of borrowers are tracker rate mortgages most suited to?
Borrowers who are happy to take a risk on interest rates and who would be able to pay more each month if rates rise are well suited to trackers. If you like stability and knowing how much you're going to pay each month, then a tracker isn't for you.
What fees will I pay for a tracker rate mortgage?
As with all mortgages fees differ from product to product but you could pay a booking fee, an arrangement fee, valuation fees and legal fees. You'll also pay a small fee for your lender to transfer the funds to your solicitor. This is known as a CHAPS fee and is usually less than £50.
Are tracker rate mortgages cheaper than fixed rates?
In a low interest rate environment tracker rates tend to be cheaper than fixed rates, although the difference will be small as there are many competitively priced fixed rate mortgages on the market today.
What happens if interest rates rise or fall?
If interest rates rise your mortgage rate will rise too. If they fall, your rate will follow suit meaning your monthly repayments will come down.
What happens when my tracker deal comes to an end?
At the end of your tracker deal you'll move on to your lender's Standard Variable Rate (SVR). You can choose whether to stay on this rate, move to another product with the same lender or remortgage to another provider.
What is the difference between a tracker mortgage and a lifetime tracker?
A tracker mortgage is set at a percentage above (or below - although this is much less likely) the Bank of England base rate for a set period of time. A lifetime tracker is set at a percentage above or below Bank base rate for the duration of your mortgage term - usually 25 years.
What is the difference between a tracker rate and a Standard Variable Rate?
A Standard Variable Rate (SVR) is the lender's default rate. While it can move in line with Bank of England base rate, the lender can also increase it or decrease it whenever it chooses.
How can I compare tracker rate mortgages?
Tracker rate mortgages are amongst the most competitively priced mortgages on offer at the moment. You can search all of the products on the market using Know Your Money's comprehensive comparison tables.