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Find out how a tracker mortgage works and how it compares with a fixed rate mortgage.
A tracker mortgage is linked to the Bank of England base rate. This can change up to eight times a year.
The interest rate you pay will be the Bank of England base rate plus a certain percentage. This will depend on the type of deal you choose.
When the Bank of England base rate falls, so does the interest you’ll pay on your mortgage. This means lower repayments each month, which could save you money and free up more of your budget.
On the other hand, if the base rate rises, your mortgage interest rate will too. This could mean your monthly payments go up. Plus, the extra money you pay would only cover the interest rate rise and wouldn’t clear more of your mortgage.
It’s also worth knowing that some tracker mortgage deals are equipped with what’s known as a ‘collar’. Lenders will add these to stop your repayments from going too low, even if the base rate drops below a certain percentage.
You can, but it pays to give it some thought before doing so. If you’re still in your introductory period, you’ll likely have to pay an early repayment charge. This is also the case if you’re on a long-term tracker.
It’s best to check the terms and conditions with your mortgage provider before making any overpayments.
Tracker mortgages can give you a cheaper rate than fixed deals. However, your repayments are ultimately at the mercy of the Bank of England base rate.
Here are the pros and cons of choosing a tracker mortgage.