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What is a tracker mortgage?

Tracker mortgages are a flexible type of mortgage that follows the Bank of England’s base rate (BoE), the Bank of England decides whether to change its base rate on the first Thursday of each month, but the rate has been fairly stable in recent years.

To understand more about the Bank of England base rate click here.

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How do tracker mortgages work?

Tracker mortgages work on the basis of the Bank of England base rate plus or minus a certain percentage. For example, if the interest you pay on your monthly mortgage repayments is set as the base rate plus 2%, and the base rate at the time of writing this is 0.25%, the amount of interest you need to pay on your monthly repayment will be 2.25%.

Because tracker mortgages track the base rate, this means the rate you pay may change. So if the Bank of England base rate increased to 1%, then in the example above the rate you would pay would increase to 3%. Equally, if the base rate fell to 0.1%, your rate would decrease to 2.1%.

Tracker mortgages are a flexible way of taking advantage of interest rate drops, but it’s important to make sure you can still afford your repayments if the rate were to increase.

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How often will a tracker mortgage interest rate change?

The Bank of England has changed has only changed its rate four times since 2016. (Currently 0.25%)

The Bank of England tends to increase the base rate if the economy is thriving and the economy is growing, and will fall during projected economic hardship. This means that with a tracker deal, you will pay less for your mortgage during economic hardship, but your interest rates may rise when the economy thrives.

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What are the benefits & negatives of a tracker mortgage?


Some advantages of tracker mortgages include:

  • Tracker mortgage rates can be more attractive than other mortgage deals
  • The Bank of England base rate has been at an all-time low for the last 10 years
  • It is common for tracker mortgages to have no early repayment charges, so it may be easier to overpay on your mortgage with no early repayment charges
  • If the Bank of England base rate falls, so will your monthly payments, saving you money

Some disadvantages of tracker mortgages can include:

  • If the Bank of England base rate increases, your mortgage monthly payments will also increase.
  • Budgeting may be more difficult as your payments could change frequently
  • If the base rate were to increase, this option could become more expensive than if you had chosen a fixed rate mortgage

How do I find the right tracker mortgage?

If you are looking for a tracker mortgage or are looking to remortgage your existing tracker mortgage, finding the right deal for you is right at your fingertips. 

Contact one of our tracker mortgage experts at Blossomfield Mortgages, and we will be more than happy to compare thousands of mortgage products to find you the right deal! You can contact us on 0345 066 6555 or simply drop us a chat message. 

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

 

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Contacted Blossomfield Mortgages in regards to a mortgage application. The service I received was both professional and quick. I have recommended Blossomfield to friends that are in the same situation I was and would do so again.

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Blossomfield Mortgages are brilliant mortgage brokers in Birmingham, they have helped me with various mortgages. They are friendly, quick, efficient and very helpful with giving advice. I even had my first mortgage offered within less than a week!

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Amazing service provided by Blossomfield in a quick and timely manner. No matter what questions we had they were always willing and happy to answer with their wide knowledge and experience. Would recommend Blossomfield to anyone.

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Excellent service from Blossomfield Birmingham, they were able to sort a mortgage out for me very quickly and made the whole process simple and stress free, always available when needed and provided regular updates.

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Frequently asked questions...

How much will a mortgage cost per month?

The monthly cost of the mortgage is determined by three things: the mortgage amount borrowed, the length of the mortgage and the interest rate. Thus, the cost is specific to your individual circumstances. Your dedicated mortgage broker will help you find the right mortgage for your monthly budget.

In the meantime, why not check out our mortgage calculator?

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What different types of mortgages are there?

Fixed & variable rate mortgages

The interest rate you pay on your mortgage will depend on the type of mortgage rate you choose.

Fixed-rate mortgages require you to repay an interest rate that is fixed for a certain period of time. The fixed-rate will mean you’ll know exactly how much your monthly repayments will be for the specified period.

If you have more flexibility, you may want to consider a variable rate mortgage. A variable rate mortgage may start at a lower rate than a repayment mortgage. However, the rate you pay is likely to increase in future at your lender’s discretion.

Similarly, a tracker mortgage will follow the Bank of England’s base interest rate. When the Bank of England’s base rate drops or increases, so will your mortgage payments.

Repayment or interest-only mortgages

With a repayment mortgage, at the end of your mortgage term the total amount you originally borrowed plus the interest accrued will be fully paid off. If you choose an interest-only mortgage, the monthly repayments may be lower, but you will have only paid off the interest on your mortgage once your mortgage term finishes.

Flexible or non-flexible mortgages

For flexibility in how much you pay each month, you may want to consider a flexible mortgage which may allow you to take payment holidays or make overpayments and underpayments when you require.

Our experienced mortgage brokers will support you through the entire process and help you get a competitive deal for your financial situation.

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What is a Credit Score?

Your credit score acts as a way of showing how good you are at managing your personal finances and credit repayments. Lenders will calculate their own score and use it to decide whether they should or shouldn't lend you money based on their lending criteria.

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