A warning has been issued for anyone currently on a tracker mortgage, as broker L&C Mortgages reports that the number of people applying for a tracker in April was more than three times that in March.
Tracker Mortgages Back in Focus
"They are back in the conversation," says Nicholas Mendes at broker John Charcol. However, he emphasizes that a lot depends on "whether you can afford to be wrong – that is, if rates were to rise, would you be able to afford your mortgage?" Mark Harris at broker SPF Private Clients adds that if not, a fixed rate makes sense and provides peace of mind.
Financial Tolerance Matters
David Hollingworth at L&C Mortgages advises: "If you are considering a tracker, think about what your own degree of tolerance is, and how well-placed financially you would be to deal with that." Mendes further notes that a tracker may be worth considering for borrowers with comfortable affordability, savings in reserve, and enough room in the budget to absorb a higher payment.
Understanding Tracker Mortgages
A tracker mortgage is a type of variable rate mortgage that "tracks" a base rate, usually the Bank of England's base rate, although some may follow the lender's own base rate. Repayments, including interest, can change every month. The key difference from a standard variable rate mortgage is that lenders set their own variable rate, whereas a tracker mortgage normally follows the Bank of England's base rate, which they do not control.
Costs and Flexibility
"No early repayment charge is useful, but it doesn't mean there are no other costs," says Mendes. "Arrangement fees, valuation fees, or legal costs can still matter if the plan is to use the tracker for only a few months before switching again." He adds that many trackers come with no early repayment charges, allowing borrowers to sit on a lower rate for now and move to a fixed rate later if pricing improves. "In a market where fixed rates can shift quickly, that flexibility has real value."
