Tuesday, February 28, 2006

What is a Tracker Mortgage?

A Tracker Mortgage “tracks” (follows) the Bank of England Base Rate (BoEBR) usually plus a certain figure eg 0.5%.

At the moment the BoEBR is 4.5%, so you will pay 5% interest.

If the BoEBR falls to 4.0%, you pay 4.5%
If it rises to 5% you pay 5%.

How about a discounted tracker mortgage?

This is where for 2-5 years the interest rate will be a small fraction above the BoEBR.

After it will revert to a higher figure, usually the Standard Variable Rate (SVR, around 6.5% currently).

Note the caveats at the bottom of the page!

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