Tracker rates are a variation on the standard variable rate. Instead of being a lender chosen rate the tracker rates work by following a particular interest rate to determine what you pay each month usually the Bank of England base rate, [in commercial lending the LIBOR rate is often used, though not so commonly today] then adding a fixed amount on top. If the base rate goes up or down, so does your interest rate, but by a fixed margin linked to the underlying rate being tracked. It is less arbitrary than an SVR and the rate therefore more transparent.
There are many different styles of interest applied to mortgages and this can be more complex when one considers that interest may be chargeable to mortgage account either on a daily, monthly or less commonly now, annual period. This can have major implications when considering additional payments to reduce the term of a mortgage.
A parting thought…
Whatever your borrowing requirement it is usually advisable to ensure the payments can be met, even if the borrower’s health or income are interrupted through accident or ill health, or even death.
- How will you meet your long term loan commitments if your income is interrupted,
either by illness or death?
- Ask us about solutions – before you need to rely on them…
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOUR DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.