TRACKER MORTGAGE

The tracker mortgage has become a popular product in the UK. When borrowers are remortgaging, it’s obviously tempting to be attracted to the best mortgage rate on the market, which often tends to be a discount or a tracker type mortgage. Tracker mortgages are often suited to borrowers who are looking for lower initial payments and can take the risk that their payments may well increase at a later date. A tracker mortgage is a variable rate mortgage which always tracks the Bank of England’s Base Rate. Your payments will change in accordance with external market interest rates. You will quickly benefit from any potential changes, plus the rate on your tracker mortgage always maintains the same differential between the rate you pay and the interest rate set by the Bank of England. You will need to be aware that the interest rate tracks whatever rate is set by the Bank of England with a constant differential. The result on your monthly mortgage interest payments is that they go up when the base rate goes up and go down when the base rate goes down. A number of different rate tracker mortgages are available on the UK market, including two-year tracker mortgages, five-year tracker mortgages, ten-year tracker mortgages and mortgages that track a rate for the life of your loan. The application fees, product and valuation fees, and the flexibility of the loan will depend on the lender and your circumstances. As with any type of loan, it’s of the utmost importance to check the small print details on a tracker mortgage. The interest rate will be set at a certain amount i.e., 0.10% below the base rate for 2 years. However, your lender could well specify that they reserve the right to review the situation should the base rate fall extremely low.  They may also specify a minimum rate that you will have to pay if the base rate falls below expectations, in order to protect them from your paying an extremely low mortgage rate. These types of clauses defeat the whole object of the tracker mortgage. Your mortgage broker should be able to find you a great tracker mortgage, with a low interest rate and no hidden clauses. All the searching will be done for you to ensure you get the best deal possible. The market will be thoroughly searched, from high street lenders to smaller specialist lenders.