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Two Year Tracker Mortgages

We look at the pros and cons of a short-term tracker mortgage and ways you can navigate a changing market.

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 12, 2021

Tracker mortgages are a popular option for people looking for a short-term mortgage. They’re often cheaper than their fixed-rate mortgage counterparts. But with this backdrop of political and economic change, getting a tracker mortgage which is impacted by external factors may seem like a risky option.

In this article, we’ll run you through the advantages and disadvantages of a short-term tracker mortgage and give you some tips on how to navigate a changing market.

What is a two-year tracker mortgage?

A 2-year tracker mortgage is a mortgage with a variable interest rate that lasts for two years.

Tracker mortgages follow an interest rate that’s usually based on the Bank of England’s base rate plus an agreed percentage. The Bank of England will change this rate in line with wider economic factors like the state of the economy, so the amount of interest you pay per month could vary.

Tracker mortgages can be taken out for a term ranging from 2 years to 10 years, and when this term comes to an end, under usual terms, you’ll be moved to the lender’s standard variable rate (SVR).

Why get a two-year tracker mortgage?

So, if getting a tracker mortgage adds risk and uncertainty to your monthly payments, what makes a tracker mortgage an attractive offer? And how can you judge which direction your interest rates will take – particularly in the current economic climate?

Base rates had been at a low for much of a decade, but they’ve risen twice since 2017. However, even in the face of these interest rate hikes, tracker mortgages remain cheaper than the 2-5 year fixed rate mortgage alternatives: the lowest tracker rate is cheaper than the lowest fixed-rate mortgage.

However, the difference in interest rate is minimal and getting a short term tracker still poses a risk: any change to the base rate could make it more expensive.

Why a 2-year tracker mortgage may be right for you

A tracker mortgage may be right for you if you’re looking for a low-rate loan, and your financial situation allows for a buffer to handle any potential rate increase.

2-year tracker mortgages are also less risky than their 5 or even 10-year alternatives, as it’s more difficult to predict rate fluctuations over a longer period.

For many people, putting up with the risk of a slight interest rate increase over just two years is a feasible option.

A tracker is also suited to people looking for a short term mortgage loan with flexible payback options. It’s handy if you’re planning to move or resell the house quickly but check the terms carefully as many tracker mortgages have a tie-in period with early repayment fees.

When a 2-year tracker mortgage may not be best for you

If you need absolute certainty over how much you will be paying back every month, and your financial situation doesn’t allow for any potential rate hike, a fixed-rate mortgage is better suited to your needs.

Trackers also become less attractive for people looking for a longer-term mortgage deal. This is because it’s harder to predict which way the market will go over the long-term and how this could affect your monthly repayments.

There’s also the option to minimise your risk by applying an interest rate collar – a level beyond which your interest rates won’t fall. However, not all tracker mortgages have collars, and the specific terms and conditions will vary according to the provider.

Some providers of two-year tracker mortgages, such as Virgin Money, offer a feature which allows you to switch to a fixed-rate mortgage at any point in your term without having to pay an early repayment fee.

Getting advice from a broker will ensure you take on risk in line with your financial situation and get a mortgage on your own terms.

Call Online Mortgage Advisor on 0808 189 2301 or make an enquiry and we’ll put you through to one of the experienced mortgage brokers we work with who can advise you on tracker mortgages and how to find the best rates.

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Best two-year tracker mortgage interest rates

To find the best two-year tracker mortgage interest rates, you’ll need to carefully search the whole mortgage market.

Online calculators will help you compare 2-year tracker rate mortgages. They will show the current bank of England base rate as the initial rate, and the subsequent rate is the rate added onto this by the provider. However, these online calculators only offer a rough idea of interest rates and not a thorough comparison of terms and conditions.

The best way to quickly compare mortgage interest rates and terms and conditions is to speak to an expert mortgage broker who can search the whole market and take you directly to a mortgage deal that’s the right match for you.

Being introduced to the right lender first time could save you time, money and potential marks on your credit report!

Speak to a tracker mortgage advisor today!

Getting help from an expert mortgage broker will help you find a tracker mortgage with the rate and terms that are right for your situation.

Online Mortgage Advisor works with specialist mortgage brokers who can help you calculate mortgage costs and compare mortgages to take you directly to your top lenders. Give us a call on 0808 189 2301 or make an enquiry.

Then sit back while we do the hard work of connecting you with the right broker for your situation. We don’t charge a fee to introduce you, your credit file won’t be affected and there’s no obligation.

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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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