Tracker
Tracker mortgages offer borrowers a variable-rate option that's tied to an external interest rate, typically the Bank of England's base rate. The interest rate on a tracker mortgage moves in direct correlation with changes in the base rate, providing borrowers with transparency and flexibility.
At the start, a tracker mortgage sets an initial interest rate at a fixed percentage above or below the base rate. For example, if the base rate is 1.5% and the tracker is set at 1% above the base rate, the initial interest rate on the tracker mortgage would be 2.5%.
During periods of low-interest rates, tracker mortgages can be appealing, as borrowers can benefit from lower monthly payments compared to fixed-rate mortgages. However, it's essential to consider the potential risk of interest rate increases, which could lead to higher monthly payments in the future if the base rate rises.
Tracker mortgages typically come with an initial rate period, lasting two to five years, during which the interest rate remains fixed. After this period, the mortgage usually reverts to the lender's Standard Variable Rate (SVR), which may be higher and can fluctuate independently of the base rate.
When considering a tracker mortgage, it's crucial for borrowers to carefully evaluate their financial circumstances and risk tolerance. Seeking advice from Austin Friars Financial can help ensure that a tracker mortgage aligns with their long-term financial goals and individual situation. This way, they can make an informed decision that suits their needs and preferences.
A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.