What is a tracker mortgage?
Mortgage rates are rising, and predictions state that the interest rates will increase, even more, it is more important than ever to check your mortgage deal and to find out if you could save money in the short term and the long term by remortgaging.
The average five-year fixed term hit over 6% for the first time in 12 years. The average two-year fixed mortgage reached 6.47%, the highest since the financial crisis in 2008, while the average five-year deal was 6.29%, according to the data firm Moneyfacts.
The Bank of England Base Rate increased their rates in September from 1.75% to 2.25% – the highest level it's been since 2008. With more increases expected meaning mortgages getting even more expensive.
With everything raising and the interest rates increasing you may be better off going onto a tracker rate.
Here is some more information…
What is a tracker rate?
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. The tracker rate follows the base rate, so when the base rate increases your interest rate will increase, and if it decreases your rates will decrease.
What are the advantages?
When you’re on a tracker mortgage if the base rate decreases, then your mortgage tracker interest rate will decrease meaning your monthly repayments will reduce.
Some lenders will allow you to make overpayments up to a certain level without a charge, If you’re on a tracker mortgage your monthly will decrease and you could save this money to overpay your mortgage and it will clear faster.
Not having any early repayment charge will provide flexibility if you are thinking of moving or remortgaging in the future.
What are the disadvantages?
Because a tracker mortgage is connected to base rates, when the rate it tracks rises, your tracker mortgage rate will increase so will your monthly mortgage repayment.
If the rates begin to rise more quickly than you expect and you want to switch mortgage products, you may face an early exit fee if you choose to change your mortgage before the fixed-term period ends.
Ask for help
At The Money Partnership, we will try and help you and give you advice on what is the best option. If you are unsure what to do or if you want to change to a tracker mortgage then you come in to have a chat with us or you can give us a call.
