Tracker Mortgage Disadvantages

Tracker

A Tracker mortgage is a variable rate mortgage where the interest rate always follows the Bank of Englandís Base Rate.

Mortgage Disadvantages

Get a Free Quote Disadvantages to Tracker mortgages
The main disadvantage to the Tracker mortgage is felt when the Bank of England base rate rises and perhaps rises again. In a short space of time, before you have had time to adjust and perhaps even before your lender has responded with its own Variable Rate rise your Tracker mortgage will mean that your monthly repayments will rise.

Payment Out-Goings Uncertainty
In fact although large fluctuations in base rate have not been evident in recent years there has been constant tinkering with the Bank of England base rate which can mean that borrowers with a Tracker mortgage may not know from month to month what their out-goings are going to be. That can be uncomfortable for some house buyers and the uncertainty will make a difference particularly for first time buyers and those with a tight budget.

Possible High Variable Rate
The introductory offers of a low rate can be over in what seems to be no time to the borrower and they may then find themselves tied to a high Variable Rate with penalty clauses in force to prevent them switching. The sudden rise in monthly payments can seem like quite a shock if they are unexpected.
It is also possible that the Tracker mortgage will have a arrangement or admin fee attached to it at the beginning and it is worth checking the small print for any hidden extras.

Lender Restrictions
The whole point of a Tracker mortgage is that it can fall when the base rate falls, but some lenders will limit that fall and you should be fully aware of any such restrictions before you commit. Similarly lenders may sometimes reserve the right to change the margin that the Tracker is tracking the Bank of England base rate. Again this would seem to render the Tracker less attractive limiting your possible savings and so it is worth checking with a broker to make sure of the details.

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Typical Interest Payments

First Time Buyers

2.89%

Purchased Fixed

2.89%

Discounted Rate

2.99%

Buy To Let

2.99%

Commercial

3%

 

 

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