One very underused resource in the mortgage industry is the tracker mortgage or rate tracker mortgage. Due to a general lack of knowledge about tracker mortgages, borrowers tend to go for fixed rate or variable rate mortgages. However, with the uncertainty surrounding interest rates in today's economy, a tracker mortgage may be a good choice for many potential mortgage customers who are concerned with being trapped in a high fixed rate mortgage.
Tracker mortgages or rate tracker mortgages are an alternative to fixed rate mortgages. It's called a tracker mortgage because your interest rate will "track" the Bank of England's base rate.
With a tracker mortgage, the interest rate is anchored to the base rate, and your lender will fix your rate at a percentage above the base rate for a period of 2-10 years, or in some cases, it will be a tracker for the entire term of the mortgage. Because your rate is linked to the base rate, whenever the base rate moves up, down, or remains unchanged, yours will do the same.
The advantage of a tracker mortgage is that you are not tied into a single interest rate for the entire term of the mortgage. This means that your interest rate will be able to move up and down along with the base rate. This is unlike a fixed rate mortgage in which you will have the advantage if you've got a fixed rate that is lower than the current base rate, but if the base rate dips below your fixed rate, you'll lose money.
Tracker rate mortgage rates are revised on a monthly basis. The Bank of England Monetary Policy Committee meets each month to weigh factors such as inflation, the housing market, consumer debt, and consumer spending. Once they have considered these factors, they decide whether the base rate needs to be increased, decreased, or whether it's best left unchanged.
While interest rates should be an exceedingly important part of your decision about which type of mortgage to go for, it is not the only thing that you need to consider. While having the right type of interest rate can save you a lot of money, if you don't pay attention to factors like application fees, valuation fees, early termination penalties, and loan flexibility, your are likely to lose a lot of money. All of these different facets of a mortgage are dependent on the lender you choose to work with.
If you think a tracker mortgage is the right type of mortgage for you, take a moment to fill out our short mortgage form, and an experienced mortgage adviser from the SimplyFinance network will contact you soon to discuss your tracker mortgage options. We'll introduce you to the best tracker mortgage lender for your specific financial goals and needs.