Base Rate Tracker Mortgage
Hot Topics
- What Exactly is a Mortgage?
- A mortgage is basically a loan – a loan that is secured on the value of a property which you pay back over a given period of time.
- Do I Need a Guarantor?
- If your lender is concerned about your ability to meet your mortgage commitments, they may ask you to provide a Guarantor.
- 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.
- What Are Buy To Let Mortgages?
- A buy to let mortgage is an excellent opportunity to cash in on the property boom at the moment – because while many homeowners can afford a 2nd home, there’s also a booming market for those who cannot afford to get a mortgage, and need to rent. Find yourself a good location and reliable tenants and your monthly repayments on your mortgage will be covered by their rental yield.
- I Have Been Turned Down For A Loan Or Credit Card, Will I Still Be Able To Get A Mortgage?
- If you have been turned down for a credit card or loan, then you need to find out why your application was rejected before you apply for a mortgage.
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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