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The Pros and Cons of a Tracker Mortgage

Learn about the advantages and disadvantages of a tracker mortgage in this guide.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 12, 2021

Tracker mortgages are a type of variable mortgage that is most commonly tracked to the Bank of England’s base rate. The rate is not an exact match and is instead often a percentage above the base rate.

If you’re wondering whether a tracker mortgage is right for you, it’s worth carefully examining the pros and cons of it to see if this type of loan fits your circumstances and finance goals.

While we always recommend that you speak with an experienced advisor to ensure you get the best advice and mortgage deals on the market, we’ve also created this article to outline some of the advantages and disadvantages of tracker mortgages.

The experts we work with are established in their field, meaning that they can provide the specialist information you need to make an informed decision about tracker mortgages.

Call us on 0808 189 2301 or make an enquiry and we’ll put you in touch with an expert for a free, no-obligation chat.

Are tracker mortgages any good?

A tracker mortgage is a type of variable rate mortgage where the rate you receive will only change when the Bank of England or other rates setter raises or reduces its main interest rate. This is also known as the base rate.

A tracker mortgage is typically offered over a fixed period (usually two years or five years) but it can also be offered for the lifetime of the mortgage.

A tracker mortgage can be a good option if you’re confident that the interest rate will remain low (or fall) over the period of time you have the tracker for.

It might also be worth considering if transparency is particularly important to you, and you feel more comfortable knowing exactly why your variable tracker rate and your mortgage payment has changed. That’s provided that you’re aware of the risk that your mortgage payments could rise.

If you think a tracker mortgage is a good idea but you’re uncertain of what rates and terms are out there, or which tracker mortgage lender you should choose, it can be a good idea to speak to an experienced mortgage advisor, like those we work with.

They can answer all your questions about whether or not a tracker mortgage is the right option for you and help you find the right deal for your needs.

Can tracker mortgages help keep my monthly repayments low?

When interest rates are low and steady or high but falling, a tracker mortgage could be a good option. That’s because even though it is a type of variable rate mortgage, your tracker mortgage rate will fall by the same proportion if the central bank cuts its interest rate, resulting in lower mortgage payments.

It’s also possible that a tracker mortgage rate may be lower than the lowest two-year, fixed-rate mortgages available. That’s because although fixed-rate mortgage deals are often attractively priced, as a borrower you still pay for the certainty of knowing how much your mortgage is going to cost over a set period of time.

It is also worth noting that all lenders apply their own calculations when it comes to setting the interest rate against the Bank of England rate changes. Some lenders also work with the Libor rate.

Is a tracker mortgage a good option among so many choices?

Right now, there are many mortgage options to choose from, including:

  • Fixed-rate mortgages
  • Tracker mortgages
  • Standard variable rates
  • Discount mortgages

With so many options available, it’s easy to understand the difficulty of knowing if a tracker mortgage is a good option in comparison with another. Many will weigh up the pros and cons of a tracker mortgage vs a fixed-interest mortgage, which is why it’s always advisable to speak with an advisor.

However, it’s safe to say that particularly when UK interest rates are low or falling, a tracker mortgage is a good option. To find out more about if now is the right time for you to take out a tracker mortgage, get in touch.

What are the pros and cons of a tracker mortgage?

As with all mortgages, tracker mortgages have advantages and disadvantages.

Read on to find out what they are…

Advantages of tracker mortgages

  • Tracker mortgages are most attractive when interest rates are falling.
  • They’re pretty transparent, only changing when the central bank cuts or raises interest rates, and only rise or fall by the same proportion when the base rate changes.
  • When the rate falls, you may be able to overpay on your updated monthly mortgage charge.
  • Even though your tracker mortgage is tied to interest rates, some products have a cap beyond which rates can’t rise.

Disadvantages of tracker mortgages

  • Because a tracker mortgage is linked to base rates, when the rate it tracks rises, your tracker mortgage rate will rise too and so will your monthly mortgage repayment.
  • If rates begin rising more quickly than you expected and want to switch mortgage products, you could face an early exit fee if you choose to change your mortgage before the fixed-term period ends.
  • Some tracker mortgages have a ‘collar’ or a rate which they won’t fall below even if the central bank cuts interest rates that far, this means you might not benefit from prolonged rate cuts.

The advantages and disadvantages of tracker mortgages we’ve outlined are helpful when deciding on what type of mortgage to choose. However, to find out more and have all your tracker mortgage-related questions answered, speak with a mortgage advisor.

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Speak with a tracker mortgage expert today

If you’ve read our tracker mortgages article and think it could be a good option for you, then call us on 0808 189 2301 or make an enquiry.

The experts we work with have whole-of-market access, meaning that they often have access to deals that aren’t available to the public.

They’ll also do the running around for you, so you can relax while your mortgage is being handled professionally.

We can help!

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Tracker Mortgages. Ask us a question and we'll get the best expert to help.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the 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.

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