Tracker Mortgage

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Track interest rates and pray that they fall

Unlike variable rate mortgages, which the bank can vary at will, a tracker mortgage is guaranteed to follow the ups and downs of interest rates usually the Bank of England base rate. If the rate falls, so do your payments but if it rises, your mortgage costs more.

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On the face of it, a tracker mortgage sounds like a variable rate mortgage: if the base rate goes up, so do your payments; if it goes down, your payments go down too. However, variable rate mortgages aren't guaranteed to do this: if the bank doesn't fancy cutting rates, then it doesn't have to. With a tracker mortgage, cuts and increases are guaranteed.

A tracker mortgage is usually based on the Bank of England base rate, with a slight increase so the lender can still make money. With a variable rate mortgage you'll normally pay around 1.5% more than the base rate; with a tracker mortgage the difference is much lower usually, around 0.7%.

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