Tracker Rate Mortgages

Tracker rate mortgages are standard interest-only or repayment mortgages, but their interest rate is directly linked to the Bank of England's base rate. This means that if the base rate decreases, your mortgage's interest rate will also decrease. Typically, a tracker rate is set at one percent above the base rate, so if the base rate is five percent, the interest rate on your mortgage would be six percent.

Tracker rates usually apply for an agreed period only, after which you would pay the lender's standard variable rate. Usually this agreed period is two years, but longer term deals are available.

The benefit of a tracker rate is that you will always benefit from reductions in the base rate, which may not be the case with a discounted variable rate mortgage or a standard variable rate mortgage, since the lender is not obliged to pass on any reduction to their customers. In contrast, it can be difficult to budget for your monthly repayments because the interest rate may change quite often, depending on economical conditions.

Early Repayment Fees

Like most promotional interest rate deals, such as fixed rate, capped rate and discounted variable rate mortgages, if you try to switch lenders before the end of the agreed period, you will, in most cases, be charged an early repayment fee. These fees can be very large and you may still be charged after the promotional interest rate has ended.