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A tracker mortgage usually tracks any movement in a nominated index for a set period: this could be the Bank of England Base Rate for example, and the index is selected by the lender.
So, you will benefit from any fall in interest rates over the term, but will also have to pay more each month if the index rate increases.
If you have some flexibility in your budget, should interest rates increase over the term, then you can use a Tracker mortgage to ensure that if interest rates fall, then you will benefit from this and see a decrease in your monthly mortgage repayments.
Interest charges on Tracker mortgage may be slightly higher than on variable rates. This is because the lender has to factor in any potential loss of profit if the agreed repayment at the start of the contract goes on to decrease during the future term of the mortgage agreement. If the Bank of England was to reduce its base rate, anyone on a Tracker mortgage using this as the Index will see their repayments come down by the relevant proportion.
If you apply to get out of the deal before the end of the agreed term, most Tracker mortgages apply a penalty charge, known as an early repayment charge (ERC).
Tracker mortgages may also be subject to a ‘booking/arrangement fee’ levied by the lender.
We will explain the implications of these potential costs in more detail, before you make any commitment, if we believe a Tracker mortgage is beneficial for you. We will also obtain an illustration of your payment plan.
Just as important as securing the physical bricks and mortar, you need to formulate a plan to finance your home while providing broad financial security for your family in the future.
Our wealth of specialist experience means we offer you impartial advice, based on a clear understanding of all your needs – today, and in the future: which means you can face the future with increased confidence.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments