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What is a Tracker Mortgage?

Tracker mortgages are a type of variable loan. This means that your repayments are not fixed but may go up or down depending on certain conditions. This movement is dictated by the tracking element of the deal. So, for example, if your mortgage tracks the Bank of England rate then the base measure will be set just above that. If the BOE sets a rate rise, your repayments go up. If it falls, your repayments go down.

These deals work best in a market with decreasing or low rates but may not be such a good option if they start to rise as your costs will go up. In recent years, because of low market rates, many homebuyers have saved quite a lot with these products compared to fixed options. This has led to some changes in lender terms that may affect you if you are looking at this kind of deal for the future.

Traditional trackers didn’t come with limits. In the past, this meant that repayments could just keep on increasing or decreasing until the market changed. Lower repayments may have pleased consumers, but lenders haven’t enjoyed them so much. So, now you may find that your deal comes with criteria. This means that your repayments will only go down to certain levels and may then stay the same until rates rise again. This is worth checking out if you are considering this kind of mortgage deal in the future.