Base
Rate Tracker Mortgage
A base rate tracker mortgage tracks the BOE's base rate and changes
in accordance, with a constant differential, set by the lender.
The result on your monthly mortgage interest payments is that they
go up when the base rate goes up and they go down when the base
rate goes down. The base rate tracker interest rate is usually between
0.5% and 1.0% greater than the B.O.E's Base Rate.
Base rate Trackers are usually available for a fixed term period
agreed between borrower and lender, but can also be used for an
entire mortgage term.
Lenders usually base the percentage differential (between the base
rate and base rate tracker) on your homes LTV (Loan to Value)*.
A home with a low LTV rate will more likely achieve a low base rate
tracker interest rate, whereas a home with a high LTV will most
likely give you a higher interest rate differential.
Although the base rate tracker mortgage is generally a low interest
rate mortgage, and can be combined with a discount for a fixed period,
it still has its downsides. As with all fixed period mortgage interest
rate schemes many lenders will charge a redemption penalty if you
wish to leave the mortgage scheme early. This is known as an early
redemption penalty. Some lenders may also charge an overhanging
redemption penalty. This is where the redemption penalty still applies
after the base rate tracker fixed period is over, and you are on
the lenders SVR. Another point about the base rate tracker is that
it could be difficult to budget for as the BOE's base rate fluctuates.
*For meanings of terms please refer to glossary (left information
menu)
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