You may not know this, but there are lots of different types of mortgages, not just one. Some are more common to come across than others, however, it’s mostly it’s down to an applicant’s personal and financial situation to which option will suit them best.
Finding the right mortgage option for you can sometimes prove difficult, as they all work very differently. In this article, we are going to focus on the tracker mortgage. We will look at how it works and whether or not it will benefit you.
If you would rather watch our “What is a Tracker Mortgage” YouTube video, feel free to do so. You can find lots more helpful mortgage guides over on our YouTube channel – MoneymanTV.
When you have a tracker mortgage, your interest rate is tracked from the Bank of England’s base rate, then usually another percentage is added on top of that from your lender. Your lender cannot choose the percentage rate that goes on top of your tracked interest rate, it’s normally from an external rate that they have to follow.
Here’s an example, the Bank of England’s base rate could be at 1.2% and the external base could be at 1%. This means that you will always be another percentage above your base rate, no matter what the Bank of England’s base rate changes to.
When the Bank of England’s interest rate is low, a Tracker Mortgage is great to have. We have seen it drop as low as 0.1% before, which means that your total would be 1.1.% after adding your lender’s extra percentage. During the credit crunch in 2008, interest rates shot up, this included the Bank of England’s. This meant that people were getting a 5-6% interest rate! This was not a great time to have a Tracker Mortgage.
Surprisingly, in March 2020, during the outbreak of COVID-19, the market received a similar scare but this time the interest rates went down. We saw rates as low as 0.1%; so, having a Tracker Mortgage then would’ve saved you a lot of money. Obviously, you couldn’t get a hold of a Tracker Mortgage at the time of the outbreak as the rates were extremely low and lenders won’t want you to be paying them less than they could get out of you. 8 months later (as of November 2020), it’s still difficult to get a tracker mortgage.
There are both advantages and disadvantages to Tracker Mortgages; you can’t tell when they are going to be good and you can’t tell when they’re going to be bad. No one can predict what’s around the corner; no one predicted the outbreak of Covid-19.
It all depends on the economy. A bad economy means that your Tracker Mortgage could produce some high interest rates whereas a good economy could provide you with some of the best rates available.
There are many different mortgage types out there some could be more suited to more than others. For example, a Tracker Mortgage might be better for a Buy to Let Landlord over a First Time Buyer in Cambridge. It’s also down to your personal and financial situation.
A transparent Mortgage Advisor in Cambridge here at Cambridgemoneyman, will assess your circumstances and refer you to a mortgage option that will benefit you most. Whether this is the Tracker Mortgage or another type of mortgage, we are sure that we will manage to find the perfect one for you!
As a Mortgage Broker in Cambridge that works for you, we offer a free mortgage consultation to every customer, no matter the situation. Find out what mortgage option is best for you today and get in touch.