This is a new kind of mortgage deal designed to appeal to borrowers who want the security of an interest rate that starts out fixed, but don’t want to get stuck paying over the odds if rates begin to fall.
It kicks off with a fixed rate for, say, a year and then turns into a tracker, with interest charged at a set percentage above the Bank of England’s base lending rate for the rest of the mortgage term.
(For more on trackers, go to Base rate trackers.)
This kind of deal is likely to be especially appealing at times when interest rates are rising but are expected to stabilise or fall in the relatively near future.
The initial fix protects you from further increases, while moving to the tracker rate without the costs or hassle of having to remortgage allows you to benefit right away from any subsequent falls.
Unsurprisingly, a best-of-both-worlds deal like this comes at a price.
The interest rate for the fixed period and the percentage it then tracks above base rate may both be higher than for market-leading traditional fixed or tracker deals.
You may need quite a substantial deposit to be accepted for this type of mortgage which will probably make it more suitable for remortgage customers than the average first-time buyer.
There is likely to be an early repayment charge which stretches well beyond the initial fix, to ensure you don’t take advantage of this then move to a better deal with another lender.
Of course, you may decide a fix-and-track deal is still worth having.
But if you think you’d prefer something more traditional, read Should I go for a fix or a discount?