Base Rate Tracker Mortgage
Hot Topics
- What Is A Mortgage Indemnity Guarantee (MIG) And Will I Have To Pay It?
- The Mortgage Indemnity Guarantee is also known as a Mortgage Indemnity Premium or High Lending Fee. It protects the lender against the risk of you defaulting on your mortgage debt.
- What Happens If I Want To Move Home?
- Moving home is basically the same as moving into your first home, in mortgage terms. You are free to find yourself another mortgage with either your existing lender or another lender – and can shop around for the best deal on the market.
- What Are Redemption Penalties?
- Redemption penalties are your lender’s way of getting extra money out of you when you decide to cancel your mortgage agreement early.
- How Do I Switch Mortgages?
- Switching mortgages (remortgaging) has been made very easy by the industry, in reaction to the fact that most people remortgage their homes on a regular basis i.e. every 5 years on average.
- What are Variable Rate Mortgages?
- A variable rate mortgage is when you pay a standard variable rate (SVR) that changes in line with the Bank of England's base rate. The SVR is usually between 2% and 4% higher than the Bank of England's base rate, but this will vary from lender to lender.
A base rate tracker mortgage tracks the Bank Of England’s base interest rate then adds on a additional figure to arrive at the borrowers variable rate. Your monthly mortgage interest payments go up when the base rate goes up and they go down when the base rate goes down. The base rate tracker interest rate is usually between 0.5% and 1.0% above the Bank Of England's Base Rate.
Base rate Trackers are usually available for a fixed period or term agreed between borrower and lender at the outset of the mortgage. Some lenders will offer a tracker that lasts for the entire mortgage term.
Lenders usually base the percentage differential, between the base rate and base rate tracker, on your homes Loan to Value. A home swith a low Loan To Value rate is much more likely to achieve a low tracker interest rate than a home with a high Loan To Value rate.
Although the base rate tracker mortgage is generally a low interest rate mortgage, and can be combined with a discount for a fixed period, it still has its downsides.
Redemption Penalties
As with all fixed period mortgage interest rate schemes many lenders charge a redemption penalty if you leave the mortgage scheme early. Some lenders will also charge an overhanging redemption penalty, this is where the redemption penalty still applies after the base rate tracker fixed period is over.
Financial Planning
Financial planning is particularly difficult with this type of mortgage, as the base rate fluctuates so will your repayments, this makes budgeting particularly difficult.
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