Tracker Mortgage

The interest rate for base rate tracker mortgages are set at a margin above the Bank Base Rate for the life of the mortgage. Your payments can rise or fall in line with changes to Bank of England Base Rate, but you will always know when, why and by how much.

The advantage is the cost of your mortgage will automatically fall if the Base Rate falls, however the cost of your mortgage will rise if the Base Rate increases.

Variable base rate trackers come with no redemption penalties, so you can switch to another lender at any time.

The best tracker deals on the market are typically around 2% above Bank of England Base Rate (BBR). This may sound like a good rate, but BBR will inevitably rise in the future and so will your tracker rate. Anyone considering a tracker should try and secure one with either no Early Repayment Charge, making them free to leave for another deal, or with a cap on how high their pay rate can go.

Tracker with a 'drop-lock' option

If you're a borrower who is struggling to decide between a fixed rate or tracker mortgage, you could look at a tracker mortgage which includes a 'drop-lock' option. This means that borrowers can split their mortgage between a fixed rate and tracker deal, thus getting the best of both worlds.

The benefit of this type of deal is that it allows you to take advantage of the current Bank of England Base Rate, but gives you the option to switch to a fixed rate mortgage at any time, penalty free.

Capped trackers

You could take advantage of a capped tracker deal which tracks the BBR but won't rise above a set level.

These mortgages offer an alternative solution for those who want to take advantage of the current historically low BBR, but don't want to risk their mortgage rate rising too high. However, there are only a few of these deals available on the market.

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It is very important to shop around to get the deal that is right for you.

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