How much do you know about the market for money? A tracker rate mortgage has a rate that changes based on the Bank of England's base rate, usually by a set percentage above or below that rate. The deal is for a certain amount of time, usually the first few years of your mortgage. Your monthly payments will go up or down depending on how the base rate changes.
One benefit of a tracker is that your interest rate is "tied" to the Bank of England's, not your lender's SVR. This means that your rate is decided by a group other than your lender. Even if your lender decides to raise their rates by a lot, this won't affect you. If the base rate goes down, your monthly payment will go down as well. But if the market goes up, so will your mortgage payments.
Getting a tracker mortgage depends on what you think will happen to the market over the next few years. Even though no one can know what will happen in the future, you can get advice and do research to form an opinion.
The present situation
The base rate has been set at a fairly low number for the past few years. This has helped keep mortgage rates very low and given a big boost to the housing market. Some experts think it will go up soon, even though many fears that it would cause the housing market to crash have already been proven wrong.
If you're pretty sure that the exchequer will keep the base rate low, you might want to take a chance on a tracker mortgage. As with many other "discounted" and "special offer" mortgages, you may have to pay heavy penalties if you want to switch mortgages or lenders before the tie-in period is over. However, trackers tend to have less penalties than other mortgages.
The type of borrower who tracks
Instead of trying to predict the market, it would be smart to think about your own finances. If you are pretty sure that you can handle changes in your mortgage payments, a tracker can be a good risk to take.
The Bank of England keeps an eye on the economy and looks at financial predictions. Then, it will usually change the interest rate to match, either lowering it to help the market or raising it to slow inflation. At www.bankofengland.co.uk, you can look at the minutes of monthly meetings and find out more.
