Tracker mortgages

A tracker mortgage tracks the BOE's base rate and changes in accordance, with a constant differential, set by the lender. The result on your monthly mortgage interest payments is that they go up when the base rate goes up and they go down when the base rate goes down. The base rate tracker interest rate is usually between 2.0% and 4.0% greater than the B.O.E's Base Rate.

Base Rate Trackers are usually available for a fixed term period agreed between borrower and lender, but can also be used for an entire mortgage term.

Although the tracker mortgage is generally a low interest rate mortgage, and can be combined with a discount for a fixed period, it still has its downsides. As with all fixed period mortgage interest rate schemes many lenders will charge a redemption penalty if you wish to leave the mortgage scheme early. This is known as an early redemption penalty. Some lenders may also charge an overhanging redemption penalty. This is where the redemption penalty still applies after the base rate tracker fixed period is over, and you are on the lenders SVR. Another point about the base rate tracker is that it could be difficult to budget for as the BOE's base rate fluctuates.

*For meanings of terms please refer to glossary

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