When is a good time to choose a tracker mortgage?

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When is a good time to choose a tracker?

As the name suggests, the interest rate on tracker mortgages rises and falls in line with changes in rates generally.

(For a fuller explanation, go to Base rate trackers.)

This makes them a good choice when rates are falling.

But if interest rates are predicted to rise, you might think it would be better to choose a mortgage charging a fixed rate.

In fact, a discount tracker might be cheaper.

that's because by the time everyone is talking about the fact that rates are on the up, it could already be too late to get a really cheap fixed rate.

Mortgage lenders exist to make a profit, and if they think borrowers will be stampeding to fix their interest rates, they will raise them.

(For more on this, read Is it too late to find a good value fix?)

The less popular option

As a result, you may find discounted tracker loans are available charging, say, 0.25 or 0.5 percentage points less than the cheapest fixes.

If you take one and rates do go up 0.25 or 0.5 percentage points, you will be no worse off than if you opted for that fix (and if the arrangement fee for the tracker was less, you will still have saved).

If rates rise further, you will, of course, pay more.

But if they start to fall again, so will your repayments.

You may feel it's worth paying slightly more for the certainly of a fix, or you may be willing to take a risk on a tracker.

At the end of the day, the choice is yours.

To read more on this subject please see the list below or your mortgage guide or your home buying guide

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