A base rate tracker mortgage is calculated to be slightly higher than the Bank of England’s base rate. For example a base rate tracker mortgage interest rate might be 0.25% higher than the base rate.
Base rate tracker mortgages are usually re-calculated on a regular basis meaning they change whenever the base rate changes. This means that when the base rate is low, the tracker mortgage interest will be low and when the base rate is high, the tracker mortgage interest will be high.
Standard variable rates may be re-calculated by lenders on a monthly basis whereas the base rate tracker mortgage interest is usually re-calculated more regularly. Therefore a base rate tracker mortgage is a good interest rate to pay when the Bank of England’s base rate is experiencing a downward trend.
As with all of the promotional interest rates most tracker mortgages only last for a short period. Usually the lower the rate is the less time it lasts for. Expect a base rate tracker to last for around 2-10 years. Also check for overhanging penalties as these are usually associated with base rate trackers.
Life time tracker
A life time tracker mortgage is different to a normal base rate tracker as it lasts for the life of the mortgage term. This means the interest rate you pay on your mortgage will stay a certain level above the base rate (for example 0.5%) for the duration of your mortgage.
A
life time tracker will track the base rate for the life of the mortgage but at a higher rate compared with a promotional tracker. You may also have difficulties if you want to remortgage as there will almost certainly be a redemption charge associated with it.
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