Choosing a mortgage can be a complex affair, with so many different types and interest rates available. If you are on a budget and would prefer to know exactly what mortgage repayments will be for a specified period, a fixed rate mortgage will be suitable. However, tracker rate mortgages are an option for many, although they are slightly more difficult to understand.
A tracker mortgage has a variable rate of interest, which is generally influenced by the Bank of England base rate. The Bank of England alters the base rate according to the economy, so if the economy is strong, the base rate will increase to encourage people to save more. When the economy is weak, the base rate will be lowered to encourage people to spend. With a tracker rate mortgage, the rate will monitor the base rate, so if it rises, your mortgage payments will increase. When the base rate falls, so will your mortgage payments.
Although tracker rate mortgages are currently at their lowest levels, it is important to consider whether you could afford any increases to your mortgage payments, as a rise in the base rate will mean exactly that. It is possible to have a tracker rate which is capped, so that you know that your monthly repayments won’t exceed a specified limit, although the very best deals may not offer this option.
Mortgage advisers study on a CeMAP training course so that they will understand all the different mortgage and their suitability for your circumstances.
