Base Rate Tracker (BRT) mortgages became very popular as the Bank of England Base Rate (BBR) started to decline. Clearly it is beneficial to have your mortgage interest rate linked to a rate that is reducing, and to benefit from the full rate reduction.
E.g. a Lender may offer you a Base Rate Tracker mortgage where your mortgage interest rate is 2% above the BBR for 2 years (some deals ‘Track’ the BBR for 3 to 5 years; and some for the whole term of your mortgage). See the diagram below for an illustration of how a Tracker mortgage works.
Please note the graph below is for illustrative purposes only.
Lenders are often slow to change their Standard Variable Rate after the Bank of England Rate reduces, and therefore having a rate that ‘tracks’ the changes in interest rates is particularly advantageous when rates are reducing!
If you have a Tracker Rate and interest rates fall, then your monthly mortgage payments will also fall. Tracker rates tend to be lower, initially, than the equivalent Fixed rates
If interest rates rise, then your monthly mortgage payments will also rise.
Similar to a ‘Discounted’ variable rate mortgage, which gives you a ‘discount’ from the Lender’s Standard Variable Rate, the Base Rate Tracker mortgage simply ‘tracks’ the fall and rise of the Bank of England Base Rate.
Top Tip: The difference between Tracker and Fixed Rates varies all the time, so it is very important to weigh up market conditions and expectations BEFORE committing yourself.
For friendly, plain speaking advice, please contact one of our expert mortgage advisers today on 01271 346123.