Tracker

Base rate tracker mortgages follow the Bank of England base rate at a margin above it. For example, if your tracker mortgage rate is 1.39 per cent above base rate, your rate of interest is 5.39 per cent assuming a base rate of 4 per cent. 

If base rate is falling, you benefit from cheaper mortgage payments. But if base rate rises, your mortgage payments will increase. There is no certainty regarding your monthly payment: if you need to know how much your mortgage will be each month you may be better off with a fixed rate. 

Most trackers are for an initial period of two years: after this time either the margin increases or you revert to the lender’s standard variable rate. At this point you can remortgage to another tracker mortgage or different deal. Some tracker mortgages have a lifetime rate where the margin remains the same for the life of the deal. 

Base rate tracker mortgages are transparent as the margin is fixed so the lender has to pass on any reduction – or increase – in base rate. Avoid trackers with a collar as this limits how low the rate can fall: your SPF consultant will be able to guide you on this.