As a home buyer or even a homeowner, you will find that there are a wide variety of mortgage deals in existence. Some will be available to you, others you may not qualify for. Depending on what you are looking to do, there will be some better suited for you, even if something initially looks more appealing.
As an example of this, whilst a tracker mortgage (as is the topic of this article) could seem more favourable to you, you may later wish to change onto a fixed-rate mortgage with more consistent payments, yet are unable to do so because you’re locked into another deal.
As a mortgage broker in Hull, we would always either recommend doing a lot of research of your own or speaking to a qualified mortgage expert, such as the mortgage advisors in Hull we have here at Hullmoneyman, to find out which type of mortgage is best for you.
Feel free to watch our YouTube video from our moneymanTV channel on the topic of “What is a Tracker Mortgage?“
If you are on a tracker mortgage, the interest rate on your mortgage will be following the Bank of England base rate, with another percentage that will be added on from your mortgage lender. Your mortgage lender cannot choose this additional rate.
As an example of this, the Bank of England base rate could be around 1, with your mortgage lender putting on another set amount of say 1%. This means that depending on the Bank of England percentage, your interest rate will always be a percentage above that.
A tracker mortgage is great if at the time that you get in touch with a mortgage broker in Hull, the Bank of England’s rate is low. Previously, it has sat around 0-1%, however, it would rise and decline throughout the course of the year.
During the credit crunch in 2008, the market crashed, which meant that the interest rate skyrocketed and became a lot less affordable for homeowners.
The highest we saw it go to was around 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.
On the the other side of the coin, in March 2020 we had a similar scare in the mortgage market, this time because of the Coronavirus. Rather than rise this time, we saw that as the Bank of England rate decreased massively, it went down to 0.1%.
If you were on a tracker mortgage during this time period, it was likely that you were on a 1.1% interest rate.
Of course, because of this circumstance, mortgage lenders stopped making tracker mortgages as available to new buyers, because at the end of the day, mortgage lenders still need to make a profit and this was incredibly low.
Whilst these rises and dips will happen over time, it’s important to remember the history of the Bank of England base rate too. Yes they can and will increase at times, but this was more prevalent in the 1970s when the interest rate was around the area of 17%.
As the world continued to change, we saw during 2022 the base rate start to rise again, which may have put many buyers off and understandably so. Even still, it is important to remember the past of which these rates come from, as they aren’t as high as they used to be.
There are positives and negatives to a tracker mortgage, as they heavily rely on the economy. This means that if the market is performing badly and the Bank of England rate is high, a tracker mortgage is not the best mortgage that you could get.
In this type of circumstance, you would likely be much better off with a fixed-rate mortgage, knowing that your interest rates will remain consistent for a few years, until the time comes to review your mortgage and see what is next at that point in time.
If you reverse the situation and perhaps look at if the economy is performing well with a low Bank of England base rate, a tracker mortgage will give you one of the best rates that is out there.
There are a lot of different mortgage types that are out there, readily available to a large portion of home buyers and homeowners alike. Before you go ahead and make any hasty decisions, it may be beneficial for you to get in touch with a member of our expert mortgage advice team.
A trusted mortgage advisor in Hull will be able to help you find the perfect mortgage deal for your circumstances, searching through 1000s of products across our panel of mortgage lenders.
If you are a first time buyer in Hull, you will especially see the benefit of taking mortgage advice. We have been working with mortgages for over 20 years now and know lender criteria front to back, able to match you up with the right deal.
Even if you are looking to remortgage in Hull or at moving home in Hull, you will also benefit from expert mortgage advice in Hull. As an experienced mortgage broker in Hull, we will work alongside you from the beginning of your process, through until completion and even beyond.
Last Edited 17/08/2022