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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 16th June 2020*

Lifetime tracker mortgages can be an excellent product for some homebuyers, however, many people don’t know a lot about them.

Lifetime tracker mortgage deals are available from a variety of lenders, but to make sure you find the right one for you, it makes sense to speak with a fully qualified and experienced mortgage broker.

But, to give you more of an idea of the pros and cons of a lifetime tracker mortgage, as well as other key information you need to know about them, we’ve written this article.

In it we cover:

If you want to discuss lifetime tracker mortgages now, call us on 0808 189 2301 or make an enquiry and we’ll connect you with one of the experts we work with. All advice is impartial and fee-free, so you can get the right advice with no obligations.

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What is a lifetime tracker mortgage and how does it work?

A lifetime tracker mortgage is a type of variable rate mortgage that you take out for the entire term of your mortgage. Like other tracker mortgages, it follows a specific index, usually the Bank of England’s (BOE) base rate, so when it rises, your tracker rate will increase by the same proportion, too. When the BOE cuts its interest rate, your tracker mortgage rate also fall by the same amount.

However, the mortgage interest rate on your lifetime tracker won’t be the same as the central bank’s interest rate as it will typically be higher. It will change, however, when the base rate does and by the same amount.

This makes it a transparent option with regards to why your mortgage interest rate is changing. If you’re on your lender’s standard variable rate (SVR), they can change it at any time and by any amount. They don’t have to provide you with a reason for doing so.

With a lifetime tracker mortgage, you agree to a specific term and your mortgage interest rate will track the linked index throughout the term of your mortgage.

Your deal might be the base rate plus 2%. That means assuming the linked index is the Bank of England base rate which is 0.75% at the time of writing, if the rate rises by 0.25% to 1%, your mortgage interest repayment rate will rise from 2.75% to 3%. Of course, if the rate was to drop by 0.25% then your lifetime tracker mortgage interest rate would also fall by the same amount from 2.75% to 2.50%.

A lifetime tracker mortgage is not the same as a lifetime mortgage

It’s also important to note that a lifetime tracker mortgage is not the same as a lifetime mortgage. A UK-based lifetime tracker mortgage is one you take out when you buy your home and repay over the term of the mortgage, or until you sell the property you took the lifetime tracker mortgage out on.

A lifetime mortgage, meanwhile, allows you to take equity from your home that is only repaid when you die or go into a care home.

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.

Can I get out of a lifetime tracker mortgage before the term finishes?

In most cases, a lifetime tracker mortgage deal in the UK only ends either when:

  • You sell the home the lifetime tracker mortgage was secured against.
  • The end of the term arrives and you’ve paid your mortgage off in full.

That’s not to say you can’t end your lifetime tracker mortgage deal early, but you’ll likely face financial penalties for doing so. The penalties will differ from lender to lender and will likely be on a sliding scale, becoming smaller as the mortgage term comes closer to ending.

If you think there’s a possibility that you may want to exit your lifetime tracker mortgage before it ends, a mortgage advisor can help you find the most cost-effective way to do so.

Should I get a lifetime tracker mortgage?

There are many good reasons why a lifetime tracker mortgage could be the right option for your house purchase. However, if you’re still unsure about whether or not you should get a lifetime tracker mortgage, it can be worthwhile investigating other types of mortgages to make sure it is the right option for you.

The easiest and most reliable way to do that is to speak with a fully qualified and experienced mortgage advisor, like those we work with. They have access to whole-of-market deals and completely understand all the different mortgage options out there, including lifetime tracker mortgage deals.

What is an offset lifetime tracker mortgage?

An offset lifetime tracker mortgage is where any savings can be used to offset the amount of interest you will pay on your mortgage.

A number of different lenders will allow you to offset your savings against your mortgage. However, there are specific products for this, and you cannot simply open a mortgage and a savings account with your local bank and ask to link them into an offset mortgage.

Are there any fee-free lifetime tracker mortgages available?

When it comes to lifetime tracker mortgages, the costs associated with them tend to be low. However, while in the past there were fee-free lifetime tracker mortgage deals available, now, it’s not always easy to know which lenders provide them and if you’re even eligible for them.

If you think a lifetime tracker mortgage deal is the right option for you but are keen to keep your management costs as low as possible, speaking with a mortgage advisor could be a great option.

Can I get an interest-only lifetime tracker mortgage?

Yes, there are some interest-only lifetime tracker mortgages available on the market. They’re similar to other interest-only mortgage products in that you only pay the interest on the loan and repay the capital at the end of the mortgage.

What are the best lifetime tracker mortgage rates on the market?

Finding the top-rated lifetime tracker mortgage rates can take time, particularly if you’re doing the research yourself. Yes, you can use a comparison website, but they typically don’t include the whole of market which means you could be missing out on the best buy lifetime tracker mortgages, some of which aren’t available on the market.

You could also speak directly with a few lenders to get specific details about their best lifetime tracker mortgage deals. However, while you may uncover mortgages that aren’t advertised elsewhere, you still can’t be sure you’re getting the best buy possible.

If you speak with a fully qualified and experienced mortgage broker, like those we work with, they can help make sure you agree the best lifetime tracker mortgage deal that’s available to you from every provider on the market.

Make an enquiry and we’ll put you in touch with the right broker for your needs.

Where can I find the cheapest lifetime tracker mortgage deal?

While the cheapest lifetime tracker mortgage isn’t always the same as the best one, for some people costs are the most important detail when it comes to securing their mortgage.

If you’re looking for the cheapest lifetime tracker mortgage, one place to start looking is with your existing lender, or research other lenders. Speaking to lenders directly can unlock some mortgage deals that aren’t widely advertised.

However, if you want to be certain you’re getting the cheapest lifetime tracker mortgage possible in 2019, or those with the lowest tracker rate, this can be a time-consuming process. And because some mortgage deals are exclusively available through mortgage brokers, you may still miss out on the best mortgage offers.

The only way to be 100% certain you’re getting the cheapest lifetime tracker mortgage is by speaking to a fully qualified and experienced mortgage broker. 

Can I get a buy-to-let lifetime tracker mortgage?

The number of buy-to-let (BTL) mortgage products available is on the rise (at the time of writing), meaning that there are more mortgage types available to landlords, including  BTL lifetime tracker mortgages.

They come with most of the same pros and cons as a residential lifetime tracker mortgage, although the arrangement fees tend to be a little higher. As with all buy-to-let mortgage products, the interest rates on offer are also higher than the best buy residential rates.

But, if you’re sure your mortgage term will include a lengthy period where the base rate will be steady or falling, then a BTL lifetime tracker mortgage could be the right option for you.

What is the best buy-to-let lifetime tracker mortgage?

Looking for the best buy-to-let lifetime tracker mortgages can be a little more difficult than searching for home-buyer deals, but it’s still something you can do by yourself if that’s what you prefer.

You can use specialist comparison sites and speak with lenders you’ve already had a mortgage with. But, as with residential mortgages, it can be time-consuming and you still won’t know for certain that you’ve found the best mortgage out there.

A good BTL lifetime tracker mortgage rate (at the time of writing) would be around 1.3% above base rate but this all depends on the rental yield and loan-to-value of the mortgage. However, to find the best buy-to-let lifetime tracker mortgage, speak with an expert.

How do lifetime tracker mortgage deals compare with other mortgages?

If you’re considering a lifetime tracker mortgage but aren’t sure if it’s the right option for you, it can be helpful to compare them with other types of mortgages. That could include fixed-rate deals and fixed-term tracker mortgages.

Lifetime tracker mortgage compared to a fixed-rate mortgage

Below, we’ve outlined the key elements that define both fixed-rate and lifetime tracker mortgages in order for you to compare.

Lifetime tracker mortgage

  • A lifetime tracker mortgage doesn’t require repeated arrangement fees as it’s agreed for the lifetime of your mortgage term.
  • A lifetime tracker mortgage rate can go up as well as down, which means your monthly repayments can change and aren’t set.
  • It’s rarely easy to exit a lifetime tracker mortgage deal before the term ends, unless you sell the property or pay an exit charge.

Fixed-rate mortgage

  • You will need to pay an arrangement fee each time you agree a new fixed-term deal.
  • A fixed-term mortgage means you know exactly what your monthly mortgage repayments are for the period of the fixed-rate, typically 2, 3, 5, 7 or 10 years.
  • You can agree a fixed rate for just two years which means you don’t have to wait too long before agreeing a different type of mortgage if you decide a fixed rate isn’t right for you.

Lifetime tracker mortgage LTVs

Another way to make comparisons between lifetime tracker mortgages and other types can depend on the loan-to-value, or LTV ratio you need. An LTV is the amount of deposit you put down and the size of your mortgage expressed as a ratio.

An example is if you’re buying a property worth £200,000 and put down a £50,000 deposit, the LTV for your mortgage is 75%, because you need to borrow 75% of its value.

When you take out a mortgage, the best interest rates and products are available to buyers with larger deposits. In most cases, if you have a deposit that’s 40% of the value of your home, then you should qualify for the best 60% LTV lifetime tracker mortgages, depending on other personal factors. Then, you could compare the estimated average monthly cost of that with a fixed rate or SVR mortgage deal for the same LTV ratio.

If you have a smaller deposit and are looking for the best lifetime tracker mortgage deal in the UK with an 80% LTV, then compare the costs and possible monthly repayments on a lifetime tracker versus the best buy five-year fixed-rate mortgage.

Speak with a lifetime tracker mortgage expert

If you’d like to find out more about lifetime tracker mortgage, give us a call on 0808 189 2301 or make an online enquiry.

Then, you can just sit back and relax while our experienced team does all the hard work of connecting you with a mortgage advisor with the right experience for your specific needs.

Updated: 16th June 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.