What is a Tracker Remortgage?

A tracker remortgage is simply a mortgage with an interest rate that tracks the Bank of England's base lending rate. These loan programs can vary in the term with some lasting for a few years then reverting back to the lender's standard variable rate; or they can last for the entire mortgage term, known as a lifetime tracker. Typically, on these remortgage deals, interest rates are set at base rate plus 0.25% for two years, or base rate plus 0.75% for a lifetime tracker remortgage.

Advantages of a Tracker Remortgage

The main advantage of a tracker remortgage is that if you can bear the potential fluctuations on your mortgage payment, you can save money on the amount of interest you pay. Most lenders set there standard variable interest rate to about 2% above the base rate, with a tracker remortgage your interest rate is about 0.25% to 0.75% above the base rate. You save 1.25% to 1.75% in interest. As compared to fixed remortgage programs, a tracker typicaly carries a rate .25% to .50% lower than a fixed deal. Effectively, a tracker remortgage is a discount deal, you can lower your interest rate by .50% to 1.75%.

Another advantage to a tracker remortgage is that every time the Bank of England changes it's base rate, your interest rate will change by exactly the same amount; this allows you to instantly take advantage of the lower rate without doing anything on your part.

Disadvantages of a Tracker Remortgage

With a tracker remortgage, your mortgage payment can fluctuate from month to month depending on the base rate; your mortgage payment will go up if the Bank of England raises rates and go down if it lowers rates. This can be very stressfull for many and be disasterous if the Bank of England substaintially raises rates for a long period of time. For some, the disadvantages of a tracker remortgage far outweigh the advantages. As with any remortgage product, it is important to carefully consider all aspects of the loan program and find the mortgage deal suitable for your financial situation.

Is a Tracker Remortgage Right for Me?

With a tracker remortgage Timing is critical, a tracker mortgage ONLY make sense when rates are falling or steady. If mortgage rates are predicted to rise, you are better off with a fixed rate remortgage.

If you are on a tight monthly budget a tracker remortgage is not the right remortgage deal for you. You will be more comfortable with a fixed rate mortgage, knowing exactly what your mortgage payment will be each month. If you can manage potential fluctuations in your monthly mortgage payment and believe that long term interest rates are going to be lower, a tracker remortgage is the deal for you. Keep in mind that a tracker mortgage is essentially a gamble, if you have the stomach for it, go ahead and toss the dice.