Tracker mortgages are an attractive option for homebuyers and property investors looking to benefit from potentially lower interest rates. Unlike fixed-rate mortgages, tracker mortgages follow an external interest rate, most commonly the Bank of England (BoE) base rate, which means your monthly payments can fluctuate depending on how the base rate moves. With interest rates at higher levels in 2024, it's important to carefully assess whether a tracker mortgage suits your financial situation.
This article explores the best tracker mortgage deals available in the UK, providing insights into the rates, terms, and features of the top products in the market.
A tracker mortgage is a type of variable rate mortgage where the interest rate is directly linked to an external financial indicator, typically the BoE base rate. For instance, if your tracker mortgage rate is set at 1.5% above the base rate, and the BoE rate is 5.25%, you’ll pay a total interest rate of 6.75%. If the base rate rises, your monthly payments will increase, and if it falls, your payments will decrease accordingly
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Here are some of the most competitive tracker mortgage rates currently available, highlighting different loan-to-value (LTV) options and mortgage terms.
Lower Introductory Rates: Tracker mortgages often have lower starting rates compared to fixed-rate deals, making them attractive for those looking to reduce initial costs
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Flexibility: Many tracker mortgages allow overpayments without penalties, giving borrowers the option to pay off their mortgage faster if their financial situation allows
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Potential Savings When Rates Drop: If the BoE base rate falls, your interest rate (and monthly payments) will decrease accordingly, offering potential savings
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Fluctuating Monthly Payments: The biggest risk with tracker mortgages is the uncertainty. If the BoE base rate rises, your payments could increase significantly, making it harder to budget
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Interest Rate "Collars": Some tracker mortgages have a "collar," meaning that even if the base rate drops, your interest rate won’t fall below a certain level. This could limit potential savings during times of rate reductions
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Potential High Follow-on Rates: When the tracker deal ends, most borrowers revert to the lender’s standard variable rate (SVR), which can be significantly higher. It’s important to have a plan to remortgage or switch deals before this happens
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Tracker mortgages can be beneficial in times of low or falling interest rates. However, with the current BoE base rate at 5.25% and the possibility of further rises in 2024, it’s important to weigh the risks of increasing monthly payments. If you value flexibility and are confident in managing fluctuating payments, a tracker mortgage might be suitable. For those who prefer the security of knowing exactly what they’ll pay each month, a fixed-rate mortgage might be a better option
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Navigating the mortgage market can be complex, especially with so many tracker options available. Fraser Bond offers expert advice to help you find the right mortgage deal tailored to your needs. Whether you're a first-time buyer or an experienced investor, our team can guide you through the mortgage process and help you secure the best possible rate.
If you're considering a tracker mortgage or want to explore other mortgage options, contact Fraser Bond today for personalised advice.
