Base Rate Tracker Mortgages or Remortgages Advantages and Disadvantages
2008 December 19
The base rate tracker mortgage is a variant of the variable rate mortgage. Instead of following the lenders rate though this type follows The Bank of England’s. The period that it follows is set at the beginning usually 2 to 5 years although 10 years and above is available. The Bank of England reviews the rate every month.
Some products track the Bank of England’s base rate exactly while others will be +0.25% or + 0.5% depending on the deal opted for when taking out the loan.
Many base rate trackers require you to pay a set up or arrangement fee. Some will have early redemption charges.
| Advantages | Disadvantages |
| Immediate benefit from falling interest rates. | No limit if interest rates rise in the future. |
| Always competitive as it is linked to the bank of England’s Base Rate. | Hard to budget as monthly mortgage payment can vary. |
| Low arrangement fees compared with fixed rate or capped. |
Who are Base Rate Tracker Mortgages most suitable for ?
- Anybody who expects that interest rates will fall.
- Customers who don’t want to pay large arrangement fees or be locked in for long periods of time.
- Those who prefer a bit more risk in the hope of getting a lower interest rate when the Bank of England lowers it;s rate.
When is the best time for a Base Rate Tracker Mortgage ?
- These are best when interest rates are decreasing.
- Can be a good choice when you believe interest rates are as high as they’ll get as then they should lower in the future.
What to watch for ?
- Increasing rates mean higher monthly payments.
- Large arrangement fees and long early redemption charges.
