Base Rate Trackers are agreed for a fixed term period stipulated between both borrower and lender. Base rate Tracker mortgages can also be agreed for the whole mortgage term these are known as a lifetime trackers.
Your provider will base the percentage value on your properties LTV (Loan to Value)*. If your property has a low LTV rate it will most likely receive a lower base rate tracker interest rate, in keeping with that philosophy a property with a high LTV will most achieve a higher interest rate differential.
If Bank changes its base rate, your interest rate will change accordingly. These mortgage deals can last for a up to 5 years, reverting to the lender's standard variable rate after that.
Just like with any other variable rate discount deal, a base-rate tracker will suit some borrowers but not others, the best time to get this type of mortgage is when interest rates are falling.
However if interest rates are rising or predicted to rise, the a fixed rate mortgage is the best option.
*Loan To Value (LTV)is the % difference between the value of the property against the mortgage offered.
Base rate tracker mortgage downsides.
- If you try to leave the mortgage scheme early you will be charged what is known as an early redemption penalty.
- Redemption penalties still apply after the BRT fixed period is over, when the lenders SVR comes into force, this is known as an overhanging redemption penalty.
- Base rate tracker mortgages are difficult for budget management, as the Bank of England's base rate goes up & down
Low-cost tracker mortgages have become cheaper in recent years, the average cost of a 2 year tracker is now at its lowest level since the 1990's. HSBC offer Lifetime trackers, and because they track the BOE Base rate for the lifetime of the mortgage, you should to save money if interest rates fall rather than rise, adversely it could be a disadvantage if interest rates go through the roof, to leave such a scheme may be costly.