Lifetime Tracker Mortgages

When it comes to working out how you should pay interest on your mortgage and what’s likely to see you paying less over time, there are a few different options to choose from. The lifetime tracker mortgage is one such choice but there’s often some confusion around what it is. In particular how it might vary from a traditional tracker mortgage.

This guide explains everything you need to know about lifetime tracker mortgages, so you can decide whether this is the right option for you right now.

What is a lifetime tracker mortgage?

You may have heard of a variable rate mortgage. This is when the interest rate on your mortgage fluctuates in line with a ‘marker’ rate – usually the base rate set by the Bank of England (but other rate markers can be used). A lifetime tracker mortgage is a type of variable rate mortgage but one that you lock in for the entirety of your mortgage term – the average term is 25 years – versus the typical selected term of 2 years or 5 years.

Whether a lifetime tracker mortgage is right for you depends a lot on your appetite for risk and is worth discussing with an expert who understands the various ways you can pay interest on your home loan.

(Lifetime tracker mortgages are not to be confused with lifetime mortgages, which are a different product altogether.)

How do they work?

When agreeing on a lifetime tracker mortgage with a lender, there’ll be a decision made on how many percentage points your rate will be above the rate it is shadowing. Typically, it’s a few percentages higher. As the marker rate then goes up and down, so too will your rate. If the rate decreases, you’ll pay a smaller amount of interest. If it increases, your payments will rise too. With some lenders, it’s possible to cap the percentage your lifetime tracker mortgage rate can climb to.

Example: The current Bank of England base rate is 5.25% (November 2023). Should you lock in a rate 1% higher than the base rate, you would pay 6.25% interest until the base rate changes. Should it drop to 5%, your interest rate would drop to 6% and if it were to rise to 5.5% you would pay 6.5%. On a lifetime tracker, this would be the pattern until the end of your mortgage term.

Is getting a lifetime tracker mortgage a good idea?

A lifetime tracker mortgage can be a great idea for your house purchase. But, as with most mortgage products, it comes with its own pros and cons and suitability will depend on your own circumstances.

Lifetime tracker mortgage pros

• The change in rate is completely transparent as it follows the BOE’s rate decisions.
• You won’t ever have to pay more mortgage arrangement fees as it is for the life or term of your mortgage.
• When interest rates are falling, your monthly repayments will also fall.
• There could be a cap or level that your lifetime tracker mortgage rate can’t rise above.

Lifetime tracker mortgage cons

• When the Bank of England is in a rate-raising cycle, your monthly mortgage payments will rise for as long as their base rate does.
• Your mortgage could end up costing more than you expected if rate rise more than you thought they would.
• You can’t budget for your exact monthly mortgage payments over the long-term because you don’t know how interest rates will change in 10 years’ time.
• There could be a collar, or rate below which your lifetime tracker mortgage rate can’t fall.

To make sure you understand exactly what a lifetime tracker mortgage involves, speak with an experienced mortgage advisor, like those we work with.

Make an enquiry and we’ll put you in touch with the right mortgage broker who can find the best lifetime tracker mortgage deals available.

What are the benefits?

With so much uncertainty, you might be wondering what the advantages are to a lifetime tracker mortgage, but there are quite a few:

• Once you lock in this deal, you don’t have to worry about remortgaging every few years and doing the research that comes with looking for a new deal.
• Having a lifetime arrangement means you save money that would otherwise be spent on remortgage fees every few years.
• Should your rate rise or fall, you understand exactly why and have a level of transparency that other models don’t always come with.
• Rather than paying a fixed rate, you might see a decrease in payments if the interest rates fall thus paying less.
• There’s often an option to overpay without incurring early repayment fees.

The disadvantages

Of course, if there were only advantages to be had, everyone would be on a lifetime tracker mortgage.

As it happens, there are some downsides, such as:

• The rates tend to be higher than on standard tracker mortgages.
• The rate isn’t predictable, meaning your repayments will likely change throughout your mortgage term, making it hard for you to know how much your mortgage will cost each month.
• If the rate stays higher than you’d expected, you could end up spending more in the long-term than you’d accounted for.
• This arrangement is a long-term commitment and can be hard to get out of unless you sell up or pay a big exit fee.

To get a more thorough picture on what the pros and cons of a lifetime tracker mortgage might be, get matched to an experienced broker who understands the ins and outs of this product.

How a broker can help you find the best lifetime tracker mortgage

A lifetime tracker mortgage is a big commitment, spanning potentially 15, 25, even 35 years, so you want to be sure that this is indeed the best way to pay your interest and that you have the best deal available. Go it alone and you could end up paying more than you should, losing money in the long-term.

Only a broker who has experience finding lifetime tracker mortgages, such as those we work with, will be able to tell you what a good deal looks like. They’ll also be able:

• To tap into their expertise and recommend whether now is the time to enter a lifetime tracker arrangement.
• Work with you to assess whether the fluctuation of repayments is something you can handle financially.
• Compare the whole market, including specialist and often hard to reach lenders, and suggest a mortgage provider that will offer you the best lifetime tracker mortgage currently available.

Get in touch and we’ll arrange for a broker we work with, who has experience with these types of mortgages, to contact you straight away.

Are lifetime tracker mortgages a good idea right now?

These are often a popular choice when the base rate is low and is expected to remain low. As it stands, mortgage rates are the highest they’ve been in a while so your rate would be in line with that high rate but would drop if and when the base rate does.

What are the typical lifetime tracker rates?

Standard tracker rates can be anywhere between 0.5%-1% above the Bank of England base rate. However, for lifetime trackers this may differ slightly depending on the lender.

When it comes to deciding whether or not a lifetime tracker mortgage is right for you – right now, professional advice is definitely recommended.

Which lenders offer them currently?

The majority of high street and specialist lenders offer tracker mortgages but not all of them offer the opportunity to secure it over the entirety of a mortgage term. When it comes to high street lenders, Barclays and HSBC, for example, only go up to a 5 year tracker mortgage while Natwest doesn’t do tracker mortgages at all.

Santander, Pepper Money and Halifax are lenders that do go for that longer time period for residential borrowers while CHL Mortgages and West One offer them for buy-to-let borrowers. But in order to decipher which lender is currently offering the cheapest lifetime tracker mortgage and boost your chances of being approved, it’s best to talk to a broker.

Can you get a buy-to-let mortgage with a lifetime tracker?

Yes, but note that, in general, interest rates tend to be higher on buy-to-let mortgages compared to a residential mortgage. Additionally, you can expect the arrangement fees to be steeper and this type of arrangement to be harder to find with only a smaller selection of lenders offering this product. This is why it’s worth engaging an expert.

What is an offset lifetime tracker mortgage?

It’s basically a longer term version of a standard offset tracker mortgage. Just like for an offset mortgage, this type of loan allows you to use your savings to offset, or lower, what your mortgage will cost you by allowing for the interest to be paid on a smaller amount. To qualify, you’d have to have savings with your mortgage provider. From there, the savings would be deducted from your mortgage size and you would only have to pay interest on the remaining amount.

For example, if you have a £150,000 mortgage but have £50,000 in a savings account, you would only pay interest on £100,000 throughout the mortgage term. As a tracker mortgage, that interest rate would fluctuate and as a lifetime tracker it would do so throughout your mortgage term.

Speak to a broker who specialises in lifetime tracker mortgages

Locking in a tracker mortgage for such a long period of time requires careful consideration. A broker can offer that, talking you through your options, the various pros and cons and how to find the best lifetime tracker mortgage possible.

The brokers we work with will be able to determine whether you’re eligible and direct you toward a lender most likely to approve your home loan application with a favourable interest rate agreement. Give us a call today on 0808 189 2301 or fill out this form and you’ll be matched with a specialist who’ll be able to share exactly what you need to know.