What are the Terms and Penalties?
With tracker mortgages, the main factors to watch out for are the size of the initial discount to UK interest rates you get, how long the discount lasts for, and the subsequent mortgage rate you pay after the discounted period expires. As with other mortgage types, the shorter the discounted period, the better the initial mortgage rate available.
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Once the initial discount has expired the mortgage rate will normally be UK interest rates plus a certain percentage. The advantage of being linked to UK interest rates – not to a mortgage lender’s Standard Variable Rate – is that, if rates fall, your mortgage repayments will follow suit immediately. You will not have to wait for your mortgage lender to reduce your mortgage rate, which they are sometimes slow to do.
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