How a tracker works
The interest rate tracks a specified index, usually the Bank of England (BoE) base rate. When the base rate moves, your tracker rate (and monthly payment) moves by the same amount. Trackers are a type of variable-rate mortgage.
Cost in different markets
When rates are low, repayments may be lower than on some fixed or standard variable products. When rates rise, repayments increase.
Rate formula
Your rate is typically Base Rate + Margin. Example: if the base is 2% and the margin is 2%, your rate is 4%. If the base rises to 2.5%, your rate becomes 4.5%.
Minimum (floor) rate
Many trackers have a minimum rate. If the floor is 3%, your rate will not drop below 3% even if base + margin would be lower.
Term and what happens next
Some trackers last for the duration of the loan, but 1 to 5 year terms are common. When the tracker ends, most mortgages revert to the lender’s Standard Variable Rate (SVR) unless you switch.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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