What is a tracker mortgage? First, how many different kinds of mortgages are out there?
There are a lot of various mortgages available, every one of them being unique with their pros and cons. Throughout this article, we are going to concentrate on the tracker mortgage and why it could be the best choice for you.
Remember, a mortgage deal is only as good as a situation in which it gets paired up with you.
For example, you could get a tracker mortgage but then further down the line understand that you want fixed payments (a fixed-rate mortgage), but it’s too late to switch as you are locked up in a deal.
This is the reason why we always advise you in doing your research first or seek Mortgage Advice in Birmingham in case you end up on the wrong deal.
If you have a tracker mortgage, your interest rate gets tracked from the Bank of England’s base rate, and then another percentage is usually added on top from your lender.
Your lender will not be able to select this rate that goes on top; it’s an external rate that they must follow. For example, the Bank of England’s base rate could be 1%, and your lender has to put on another set amount of say 1%. So, dependent on the Bank of England’s percentage, your interest rate will always be another percentage above that.
A Tracker Mortgage is perfect if the Bank of England’s rate is low; it usually sits around 0-1%; however, it will rise and decline throughout the year. During the credit crunch in 2008, the market crashed, so the interest rate shot up.
The highest peak it went up to was about 5%. If you also consider the percentage that your lender will add on top, you could’ve had 6% interest on your monthly mortgage payments.
Back, in March 2020, the mortgage market got a comparable fright; this time, it was the Coronavirus. It got reversed this time though, the Bank of England’s rate reduced enormously, it went down to 0.1%. If you were on a tracker mortgage during this time, it was likely that you were on a 1.1% interest rate.
Of course, during this period, you couldn’t pick up a tracker mortgage as the rates would’ve been too good to be true, and at the end of the day, lenders are trying to make money and not lose it. Six months later (as of September 2020), it’s still challenging to get a tracker mortgage.
The Cashback mortgage has its advantages and disadvantages. They heavily rely on the economy, so if the market is performing poorly and the Bank of England’s rate is high, a tracker mortgage is not the best mortgage out there.
Whereas, if you flip the situation on its head and the economy is performing well with the Bank of England’s rate low, a tracker mortgage will give you one of the best available rates you can get.
There are lots of various kinds of mortgages that are available in Birmingham, and it’s just finding the ideal one for you. Before leaping into any deals, it could be within your best interest to speak to an expert Mortgage Advisor in Birmingham about your mortgage options.
They will assist you in shopping around for deals, trying to find you the most economical one for your personal and financial situation.
Suppose you are a First Time Buyer in Birmingham. In that case, our service will prove highly beneficial, and we have been working within the mortgage industry for over 20 years now and know all of the different types of mortgages and which ones will benefit you as a Frist Time Buyer the most.
Even if you are looking to Remortgage or Move Home, we think that you will value of Mortgage Advice service in Birmingham. As an experienced Mortgage Broker in Birmingham, we will work with you from start to finish and provide a helping hand throughout the whole mortgage process.