Mortgages
Tracker Mortgage
A tracker mortgage is similar to a discount mortgage.
Rather than a discount being applied to the lenders standard variable rate the rate is calculated at a percentage above the Bank of Englands base rate. This makes the rate somewhat more transparent and they cannot be influenced by the lender once the margin has been set.
For example, if the Bank of England's base rate is 4.5% and the lender sets its tracker rate at 1% over base rate the rate you would pay would be 5.5% (4.5%+1% =5.5%).
If the Bank of Englands base rate fluctuates then so does the mortgage rate e.g. the Bank of Englands base rate rises to 5%, your mortgage rate would rise to 6%
Pros and Cons
As previously mentioned the lender cannot alter the rate of your mortgage unless the Bank of Englands base rate alters. The rate is tied to the Bank of Englands base rate and fluctuates accordingly. You are not therefore subject to the lender altering your rate for commercial purposes i.e. to get a better return.
Tracker mortgages generally do not have an Early Redemption Charge (ERC). The exception to this is if there is a discount on the tracker mortgage, in which case ERCs will apply during the discounted period.
Tracker mortgages tend to have lower fees than fixed, capped or discounted rates.
'A few of the lenders I contact to get the best deal for you'
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30 Dec 08, 11:12:31
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However much you think your house is worth now, it seems likely it will be worth much less in a year's time. |
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