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Home > Mortgages > Tracker
The word tracker refers to the way the interest rate on these mortgages tracks the Bank of England base rate. This means that as the Bank of England increases or decreases rates, your mortgage rate will increase or decrease by the same amount. This way you know that your interest rate and payments will only increase by as much as the central rate increases and that when the Bank of England reduces interest rates, your mortgage rate won't lag behind.
Your interest rate, or APR, won't in most cases be exactly the same as the base rate, it will just track changes. For example, your interest rate might track 1.5 percentage points above the base rate. So if the Bank of England sets rates at 4%, your mortgage would have an interest rate of 5.5%.
For example, in the first year, your interest rate could actually track below the Bank of England base rates. The next year it could track slightly above the base rate and the next year it could be higher still. Again, after a fixed period of time, it will revert back to the standard variable rate.
Make sure you're aware of what these changes are in advance and how they will affect your monthly payments so that you are able to budget accordingly.
Tracker rates eliminate this and you may find that you can get a lower interest rate during the tracked period.
However, don't forget that the interest rate on these kinds of mortgages is still variable. Interest rates and, therefore, monthly payments, can go up as well as down.
Tracker Mortgages
Tracker mortgages are one of the newer kinds of mortgages that are starting to become more popular.The word tracker refers to the way the interest rate on these mortgages tracks the Bank of England base rate. This means that as the Bank of England increases or decreases rates, your mortgage rate will increase or decrease by the same amount. This way you know that your interest rate and payments will only increase by as much as the central rate increases and that when the Bank of England reduces interest rates, your mortgage rate won't lag behind.
Your interest rate, or APR, won't in most cases be exactly the same as the base rate, it will just track changes. For example, your interest rate might track 1.5 percentage points above the base rate. So if the Bank of England sets rates at 4%, your mortgage would have an interest rate of 5.5%.
Length of Tracker Rate Mortgages
Most tracker rate mortgages are similar to fixed rate mortgages in that the tracker only applies for a predetermined number of years. After that period of time your interest rate will revert to the standard variable rate - usually slightly higher than you will be seeing for the tracker rates. Make sure you are prepared for a potential sudden increase in the interest rate and, therefore, monthly payment, once the tracker period ends.Tiered Tracker Mortgages
Tiered tracker rate mortgages are now available at a number of banks and building societies. These work in a similar way to regular tracker mortgages except that the difference between the base rate and your mortgage rate will change each year.For example, in the first year, your interest rate could actually track below the Bank of England base rates. The next year it could track slightly above the base rate and the next year it could be higher still. Again, after a fixed period of time, it will revert back to the standard variable rate.
Make sure you're aware of what these changes are in advance and how they will affect your monthly payments so that you are able to budget accordingly.
Advantages of Tracker Mortgages
The main advantage of tracker rate mortgages is that you can be sure to benefit from any fall in interest rates. Many of you may have noticed that many banks are often quick to increase interest rates on their mortgages and other loans when the Bank of England increases rates. However, they're not always so quick about it when rates are going in a downward direction.Tracker rates eliminate this and you may find that you can get a lower interest rate during the tracked period.
However, don't forget that the interest rate on these kinds of mortgages is still variable. Interest rates and, therefore, monthly payments, can go up as well as down.
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