How to Find the Best Tracker Mortgage

The tracker mortgage is very similar to a discount mortgage, but the tracker mortgage is much easier to understand. With a discount mortgage a mortgage lender offers the borrower a set percentage off of their Standard Variable Rate. Whereas a tracker mortgage follows the set Bank Rate that is determined by the Bank of England. The tracker mortgage rate will change at a defined margin. For example, if the Bank of England has a set rate of five percent, then a borrower will get a tracker mortgage at the Bank of England rate plus one percent. This means that the borrower has a tracker mortgage rate of six percent.

Lifetime Tracker Mortgages

There are a few lenders that offer borrowers the option of choosing a lifetime tracker mortgage. A lifetime tracker mortgage will track the Bank Rate for the entire duration of the mortgage by a guaranteed maximum percentage. This means that the lender will promise to never charge the borrower more than one percent above the Bank Rate. A lifetime tracker mortgage can be beneficial to the first time buyer that wants assurance that their mortgage rate will not change or go up at an alarming rate. The lifetime tracker mortgage allows a homeowner to know what they are paying each month. A lifetime tracker mortgage comes with a relatively small fee, and there are no ERC’s (early redemption charges) attached to the mortgage. This means that there is not a penalty for early payment of the tracker mortgage.

The Discount Tracker Mortgage

A borrower has the option to choose a discounted tracker mortgage. An example of a discounted tracker mortgage would be that if a lender offered discounted tracker mortgages at Bank Rate minus one percent for six months. Then, after the six month time period, it would revert back to two percent. This means that if the Bank Rate was currently five percent then the homeowner would only have to pay four percent for the first six months and then after this time period six percent for the lifetime of the mortgage.

The Pros and Cons of a Tracker Mortgage

A tracker mortgage is a straightforward mortgage rate. Many people like the tracker mortgage option because the mortgage lender cannot influence the mortgage rate once the margin is set.