Tracker mortgages are just one of the many different types of mortgages out there. Some mortgages will be more beneficial to you than others, it entirely depends on your personal and financial situation. Just because a Tracker Mortgage is perfect for someone else, doesn’t necessarily mean that it will be good for you.
As a mortgage broker in Sheffield, we always recommend that you do your research first prior to taking out a product. You need to make sure that it benefits your individual circumstances. If you get locked into a deal that isn’t right for you, you may have to wait until the end of your fixed term to switch products/remortgage in Sheffield. There may be an opportunity to switch deals if you are happy with paying a large fee.
In this article, we are going to focus on the Tracker Mortgage, looking at how it works and why it may be a good option for you. Feel free to watch our Tacker Mortgage YouTube video below:
When you take out a Tracker Mortgage, you’ll be tracking the Bank of England’s base interest rate percentage. This percentage will be used to work out your mortgage payments.
Usually, on top of the tracked percentage, your lender will add another percentage to slightly further increase your interest rate. The extra percentage of interest that they add is normally around 1%-2%. So, your interest rate should always be another percentage over the Bank of England’s.
Since a Tracker Mortgage tracks your interest rate percentage from the Bank of England, if their base rate is low, then your mortgage payments should be lower. Typically, their base rate lies around the 0%-1% mark, however, this will change month to month.
During the credit crunch crisis in 2008, the Bank of England’s interest rate shot right up. It even reached 5% at one point, which meant that customers were potentially paying their mortgage with a 6% interest rate. We all thought that a similar situation would happen again during the coronavirus pandemic in March 2020, although, this time the rates went down. If you had a Tracker Mortgage in this period, you’d be tracking the Bank of England’s base rate at 0.1%! At the time, you couldn’t take out a Tracker Mortgage as the rates were too good to be true. Lenders would be losing money if they kept handing them out.
A Tracker Mortgage can be a gamble sometimes. You’re depending on the economy performing well so that your base rate maintains its percentage. The base rate may fluctuate now and again, however, in most cases, it should stay at a similar rate.
There are lots of different types of mortgages, and some will be much more beneficial to you than others. It all comes down to your personal and financial situation.
If you want to find out more about Tracker Mortgages and how they work, feel free to get in touch with our brilliant team. If you want to discuss your other mortgage options, that’s completely fine too!
Our mortgage advisors in Sheffield have been helping first time buyers in Sheffield, home movers and people looking to remortgage for over 20 years now – we know what we’re doing.
Book your own free mortgage appointment online today and we can discuss all of your mortgage options in Sheffield.