Tracker mortgages are fairly popular in Beckenham. These loans derive their name from the fact that they track the base rate of the Bank of England (BoE). That is, the interest rate is determined by adding the lender’s interest rate to whatever the BoE base rate happens to be at the time. In the case of tracker mortgages, the lender’s rate usually remains fixed for the life of the loan. The only way your monthly payment will rise or fall then is if the BoE raises or lowers its base rate.
Tracker Mortgages in Beckenham
Advantages and Disadvantages of Tracker Mortgages in Beckenham
Here are some of the advantages and disadvantages of the tracker mortgage, advantages first.
- Because the BoE base rate has been historically low and historically stable for some time tracker mortgages can be an attractive option.
- That kind of stability means that, at least for the foreseeable future, you will know exactly what your mortgage payment will be every month and can plan accordingly.
- When BoE rates fall you can overpay and make additional headway on the principal.
- Some tracker mortgages will have a cap in place beyond which your interest rate cannot rise.
Tracker mortgage disadvantages:
- If the BoE suddenly decides to raise interest rates precipitously to fight inflation your monthly payment could increase significantly.
- If rate increases become too much for you to handle and you want to switch to a different, more affordable mortgage product, you may be hit with a big exit fee.
- Tracker mortgages often have a foundation rate below which they will not fall.
Is a Tracker Mortgage the Same as an SVR Mortgage?
Because the monthly payment on a tracker mortgage is susceptible to change, people sometimes confuse them for Standard Variable Rate, or SVR, mortgages. The difference between the two basically comes down to whether or not the lender is obliged to raise and lower the rate in accordance with any changes to the BoE base rate. With a tracker mortgage, they are. With an SVR mortgage, they are not. So if the BoE base rate falls the interest rate on your tracker mortgage will fall in lockstep. With an SVR it may, or it may not.
Contact M&LS
To learn more about tracker mortgages in Beckenham contact Mortgage & Lifetime Solutions today on 020 8462 0497 or 07966 299 247. We’ll help you decide if this type of mortgage is right for your situation.
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Please do not hesitate to contact me in the first instance on 020 8462 0497 or 07966 299247 or email robert.white@mortgagelifetime.com