What Is a Tracker Mortgage?

A tracker mortgage is a type of variable-rate mortgage that uses a base rate to determine its interest 😼rates. These mortgages usually track the base rate of the Bank of England or the European Central Bank. As such, monthly payments could f꧋luctuate based on the base rate set by these banks.

Tracker mortgages are primarily available in the U.K. and other European countries. In the States, variable- and adjustable-rate mortgages (ARMs) are tied to different benchmarks that determine mortgage rates.

How Tracker Mortgages Work

Tracker mortgages work by setting 澳洲幸运5官方开奖结果体彩网:interest rates based on the actions of another financial institution. For example, when the 澳洲幸运5官方开奖结果体彩网:Bank of England’s base rate increases, interest rates rise for tracker mortgages that are linked to it. When the base rate drops, interest rates for these same tracker mortgages will also decline. Usually, tracker mortgages are set one percentage point above the Bank of England or the European Central Bank’s base rate.☂ So if their rate is set at 1%, the rate on a tracker mortgage will typically be at least 2%.

Since tracker mortgage interest rates can fluctuate, you might pay less in interest if the benchmꦇark rate is low. But you could also pay more when the benchmark rate is higher.

Tracker mortgage rates are usually available for a short time, like the first one to five years of your mortgage. However, you might be able to get a tracker mortgage for the life of your loan. If you go with the shorter term,ꦦ you’ll need to get new terms lined up for when it’s over. You coul𒁏d:

• 澳洲幸运5官方开奖结果体彩网:Refinance to get another tracker mortgage rate
• Move to a standard 澳洲幸运5官方开奖结果体彩网:variable interest rate mortgage
• Refinance to get a 澳洲幸运5官方开奖结果体彩网:fixed interest rate mortgage

Tracker Mortgages vs. Other Mortgage Types

Tracker vs. Fixed-Rate Mortgages

Tracker mortgages are different from fixed-rate mortgages, which typically keep the same interest rate through the life of the loan. Fixed interest rates are set when you take out your mortgage, and unless you refinanc♔e it, your interest rate won’t change. A fixed interest rate allows you to have an easier time estimating your monthly payments. If you need a set structure and don’t have room in your budget to handle fluctuating costs, you may want to consider a fixed-rate mortgage.

Tracker vs. Standard Variable-Rate Mortgages

Tracker mortgages are also different from standard variable-rate mortgages and adjustable rate mortgages (ARMs), the latter of which are variable-rate mortgages wit༒h an initial fixed inte🌳rest period. 

While tracker mortgages are a type of variable interest rate, not all variable interest rate mortgages are tracker mortgages. That’s because tracker mortgages are specifically tied to a base rate that lenders cannot control. Standard variable-rate mortgages may also be based on a benchmark, such as the 澳洲幸运5官方开奖结果体彩网:federal funds rate, but♛ it’s still up to each lender to set its own 𓂃rates.

The Bottom Line

Tracker mortgages are usually avai𓆉lable in the U.K. and other European countries. If you’re looking for something similar in the U.S., consider a variable- or adjustable-rate mortgage. They aren’t tied to the Bank of England or the European Central Bank’s base rate, though other benchmarks may influence them.

Before applying for a tracker mortgage, compare them against fixed-rate mortgages and ARMs to determine which loan type would offer the 澳洲幸运5官方开奖结果体彩网:best interest rates, fewest fees, and most accessible repayment terms while working withiꦉ💎n your budget.