Base Rate Tracker Mortgage

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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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