One much underused resource in the mortgage industry is the tracker mortgages or rate tracker mortgages. Due to a general lack of knowledge about it, borrowers tend to go for fixed rate or variable rate mortgages. However, with the uncertainty surrounding interest rates in today’s economy, a tracker mortgage may be a good choice for many potential mortgage customers who are concerned with being trapped in a high fixed rate mortgage.

Tracker mortgage is an alternative to fixed rate mortgages. It’s called a tracker mortgage because your interest rate will “track” the Bank of England’s base rate.

Many tracker mortgages only run the tracking element for a limited time, (anything from 1 to 10 years) before the mortgage is reverted to the lender’s standard variable rate of interest (SVR). If you are considering a flexible tracker mortgage for a short period, you need to find out what the SVR is likely to be once you’ve stopped using the tracker feature. A standard variable rate mortgage means the interest rate is set by the individual lending company and it is their decision as to whether they pass on the Bank of England’s rate change to their customer.

They can offer very competitive rates but if you’re on a tight budget and can’t withstand any increase in your monthly mortgage repayments, and then you’d probably be safer with fixed rate mortgage instead. A tracker mortgage is probably best suited to people who enjoy a little more risk in their lives.

With this kind of mortgage there are the options to revert to a tracker for a fixed period which is usually 2 or 3 years. The mortgage repayment will be calculated upon the Bank of England’s base rate during this period. After the agreed tracker rate period expires then the mortgage will revert to the standard variable rate. During a period of interest rate reductions, your mortgage repayments will decrease accordingly. After the product expiry date you will have the option to review and make a further decision based upon market conditions at that time.