Tracker Mortgage, Lifetime Tracker Mortgage, Tracker Mortgage Rate, Base Rate Tracker Mortgage

Tracker Mortgage

The Tracker Mortgage is also a variable rate product. The rate applied will follow the Bank of England Base rate for a given period that may be up to ten years.

Interest is charged at a set percentage; typically between 1% and 2% above the base rate for the duration of the mortgage or until you switch product or provider. Unlike most other mortgages, trackers don’t revert to the standard variable rate (SRV) at any point during the life of the loan, unless it’s stated the tracker will only run for a set period at the outset.

The tracker mortgage, as well as being a fixed percentage above the Bank of England base rate (BOEBR), may also be a fixed discount off the BOEBR for a given period. This is then followed by a percentage above for the remaining term.

For example, the interest rate charged on a five year tracker mortgage might be BOEBR - 0.25% for the first year, then BOEBR + 0.5% for the remaining four years.

Trackers do offer some security as the rate is guaranteed never to exceed the base rate by more than the fixed margin. Payments will probably fluctuate however so they may not be suited to those on a strict budget.
As with standard rates, tracker rates can be fixed, capped, discounted and flexible so that they can be tailored to the needs of the individual.

With a tracker mortgage you will benefit immediately from any drop in the base rate. This means that you are able to budget instantly by working out future payments as soon as the Bank of England announces any changes.

The difference between the tracker rate and the base rate is usually a lot smaller than the margin between Standard variable rates and the base rate. And the lender can’t change this, so in some ways this is a fairer system.