A guide to Tracker Mortgages - Mallory Financial Limited

What are tracker mortgages and are they a good idea?

We aim to find a mortgage suited to your circumstances which is why we explore all different mortgage options. Here, we find out about tracker mortgages including the positives and negatives of this type of mortgage.

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What is a tracker mortgage?

A tracker mortgage is a type of variable rate mortgage that tracks the base rate (usually the Bank of England’s base rate) and is set as a percentage above it. This means that the amount you pay every month can change depending on whether interest rates go up or down.

How is a tracker mortgage different to other mortgages?

Trackers differ from a fixed rate, where you pay the same amount every month for the duration of the mortgage deal. They are also unlike a Standard Variable Rate mortgage (or variable mortgage) as lenders can choose to move interest rates when they see fit, impacting monthly payments.

How do tracker mortgages work?

Tracker mortgages follow the Bank of England’s base rate, so if interest rates fall, the monthly payments will lower and, if rates rise, the payments will increase.

You can choose from a 1 to 5-year tracker or a lifetime tracker, which lasts the duration of your mortgage, depending on product availability at the time.

It is difficult to predict what is going to happen to interest rates so it’s advisable to make sure that you can still afford to make the mortgage repayments in the event of rates increasing. The lender will also have affordability criteria that will need to be met.

What are the plus points of a tracker mortgage?

If interest rates lower, then so will your mortgage.
Early repayment charges can often be more affordable when compared to other mortgage types and some products have none.

What are the downsides to a tracker mortgage?

If interest rates increase, then so will your mortgage.
The rate could change several times a year making it harder to budget than a fixed-rate deal.
Rates could change dramatically, so much so that repayments could become unaffordable.
You may have to pay an early repayment charge to leave a deal before it ends.

“Tracker mortgages can be more appealing to borrowers looking for flexibility with their loan, but you need to be aware that a base rate tracker can go up as well as down, and there is still room for the Bank to increase rates in the months to come.” (1)

Rachel Springall, Moneyfacts

Is a tracker mortgage a good option?

If you are confident that you can afford the cost if rates were to increase, then a tracker is worth considering. However, if a rate increase would leave you tight and worrying, then perhaps a fixed rate might be more suitable as this type of mortgage could help with monthly budgeting.

You can trust Mallory Financial for your mortgage needs

Your mortgage will probably be your biggest financial commitment and so it pays to make sure you’re choosing the right type of mortgage for your circumstances. Our mortgage advisors are qualified to help you assess your situation enabling you to decide whether a tracker mortgage is the right option for you.

Concerned about mortgage payments? Come to us for help

Regardless of where you are in your mortgage journey, we are at the end of the phone ready to help you at a time that works for you.

Contact the team on 01565 874 246
Email: hello@malloryfinancial.co.uk

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