What is a tracker rate mortgage?
Tracker rate mortgages (also known simply as “tracker mortgages”) offer an interest rate set at a fixed percentage above the Bank of England base rate (or an equivalent). This means your rate should stay broadly in line with inflation while the tracker rate is in effect.
The tracker rate is normally only offered for an introductory period (often 2 years) after which you will likely be moved to a standard variable rate of interest. This may be significantly higher than the tracker rate.
What are the alternatives to a tracker mortgage?
The most popular alternative to a tracker mortgage is a fixed rate mortgage. This offers a set interest rate for an introductory period (again, 2 years is common).
The advantage of a fixed rate mortgage is that you know exactly how much you will be paying each month. However, that certainty tends to come at a cost, with the interest rates on fixed rate mortgages generally being higher than the initial rate on a tracker mortgage.
Should you remortgage when the tracker rate ends?
As the tracker rate is usually only offered for a limited period, it may be worth looking at moving your mortgage to a new deal with the tracker period ends. Many mortgage lenders offer to cover standard remortgaging fees when you move your mortgage to them, making this more affordable.
Independent Mortgage Advice
Remortgaging is particularly popular at the moment as interest rates are low.
Whether it will be a good idea for you to remortgage depends on a number of factors, including your goals and your personal circumstances.
However, in general, if interest rates are lower than you are currently paying on your mortgage, it may be a good time to remortgage.
If interest rate are higher than you are currently paying, it may be better to look at other options, such as a second mortgage or a personal loan (if you aim is to borrow more).
If you are not sure whether now is the right time to remortgage, it is a good idea to speak to an independent mortgage broker who will be able to offer impartial advice.