How well do you know the money market? A tracker rate mortgage has a variable rate, usually a set percentage above or below the Bank of Englands base rate. The arrangement is for a specified period of time, generally the first few years of your mortgage. Your monthly payments will move up and down according to the fluctuations of the base rate.
One of the advantages of a tracker is that your interest rate is tied to the Bank of Englands, not your lenders SVR. This means that your rate is set by an independent body, and even if your lender decides to make a steep hike in their rates, you will be unaffected. If the base rate falls, you will benefit from a drop in monthly payments. However, by the same token if the market rises you will be subject to increases in your mortgage premiums.
Taking on a tracker mortgage depends on how you think the market is likely to change over the next few years. While none of us can foretell the future, you can use advice and research to make an informed opinion.
The current climate
For the past few years, the base rate has been set at a relatively low figure. This has kept mortgage rates particularly low, and has given...
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