What is a Tracker Mortgage?

The appeal of tracker mortgages has increased considerably in recent months, and according to a Telegraph article, the popularity of these deals at its highest level for a decade. A tracker mortgage deal fluctuates in line with the Bank of England interest rate changes, and has sparked this renewed interest as some borrowers predict a reversal of the recent interest rate boom. If the interest rate drops at some point in the future, it’s possible that some borrowers may then be able to lock into a fixed rate, lower than what is currently available.   

There is no ceiling on how high tracker mortgage rates can rise, which could mean that borrowers see a significant rise in their monthly payments with very little notice; a risk that would not be appropriate for everybody. However, the possible savings that could be achieved with a tracker deal in comparison to a fixed deal are considerable. 

Another way of looking at this is that tracker rates are generally lower as an initial payment vs a 2 or 5 year fix product - but essentially they are predicted to rise if and when the Bank of England base rate does. The gamble is whether or not tracker rates will rise higher than the fixed rates available within the next 2-5 years.

We are currently working with our clients to determine if a tracker mortgage could be more financially lucrative in the long term, as some clients may be able to make savings in the short term. Obviously, tracker mortgage deals are not right for everyone. We work on a case-by-case basis to determine if a client is better suited to a fixed rate mortgage which allows them to keep tight budget control or a tracker, which ensures flexibility and overall savings. 

Another benefit of tracker mortgages is that many come without an early repayment charge, this means that borrowers can switch to a fixed rate deal if - and when - rates come down, without incurring a penalty.

Ultimately, the additional flexibility offered by a tracker mortgage allows borrowers to see how the market will settle over the coming months and hopefully allow them to take advantage of savings that would have otherwise been unavailable if they were already locked into a fixed rate deal.  

If you’d like to find out if you could benefit from a tracker mortgage, book a no obligation appointment with one of our team today.  

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE.