Let’s delve into the diverse world of mortgages for home buyers. The market offers a multitude of mortgage types, each possessing unique characteristics with accompanying advantages and drawbacks.
In this article, our focus centres on the tracker mortgage – examining its workings, potential benefits, and why it appeals to homebuyers.
It’s important to note that the suitability of a mortgage deal hinges on the specific circumstances it aligns with, making it essential to conduct thorough research and preparation beforehand.
As a trusted mortgage broker in Leeds with extensive experience, we consistently advocate for being well-prepared and seeking expert advice, especially for first time buyers exploring the property market in Leeds.
For further insights, you can explore our YouTube video on the same topic. Head over to our moneymanTV channel and watch “What is a Tracker Mortgage?” available on this page:
Now, let’s tackle the key question—what exactly is a tracker mortgage? When on a tracker mortgage, your interest rate mirrors the Bank of England’s base rate, with an additional percentage set by your lender.
It’s important to understand that your lender does not have control over this rate; it is externally determined and must be adhered to.
For instance, if the Bank of England’s base rate stands at 1%, your lender may add a fixed percentage, resulting in your interest rate consistently remaining slightly above the Bank of England’s rate.
The efficacy of a tracker mortgage is evident when the Bank of England’s rate is relatively low, typically hovering around 0-1%, subject to fluctuations throughout the year. Historical instances, such as the credit crunch in 2007-2008, saw the interest rate surge to around 5%.
Coupled with the lender’s added percentage, this could lead to a substantial 6% interest on monthly mortgage repayments.
Conversely, during the initial stages of the COVID-19 pandemic in March 2020, a significant drop in the Bank of England’s rate to 0.1% likely resulted in tracker mortgage holders enjoying a reduced 1.1% interest rate.
Securing a tracker mortgage during such periods, however, proves challenging, as lenders aim to strike a balance between profitability and risk.
The tracker mortgage’s appeal lies in its responsiveness to economic conditions. During periods of economic downturn with a high Bank of England rate, it may not be the most suitable option. Conversely, in a thriving economy with a low base rate, a tracker mortgage becomes an attractive choice.
Aspiring first time buyers in Leeds have a wide variety of mortgage options at their disposal. However, selecting the right one requires careful consideration of individual circumstances.
Before committing to any mortgage deal, seeking guidance from a trusted mortgage advisor in Leeds is highly recommended. They can navigate the market to identify the most competitive deals tailored to your specific financial situation.
For first time buyers in Leeds, our mortgage advice service proves invaluable. With over two decades of experience in the mortgage industry, we possess expert knowledge of various mortgage types, ensuring personalised guidance for those taking their first steps into homeownership.
Whether you’re a first time buyer, looking to remortgage, or planning to move home in Leeds, our dedicated and compassionate mortgage broker service accompanies you from the initial stages to the completion of your mortgage journey.
Date Last Edited: January 24, 2024