Tracker Mortgage

Interest rates

With a tracker mortgage, the interest rate charged by your lender is linked to a rate such as the Bank of England base rate. This means your payments can go up or down.

Advantages

  • The rate you pay tracks another headline rate (for example, the Bank of England base rate). If the headline rate changes, your tracker rate changes by the same amount. So normally your interest rate will be following trends in the marketplace.

Disadvantages

  • Some lenders impose a collar which means the interest rate won’t fall below a certain level, even if the rate is tracking continues to fall.
  • Your monthly payments can go up or down which can make budgeting difficult.
  • If you want to repay the mortgage early, there could be early repayment charges.