Tracker rate

With a base rate tracker mortgage the rate of interest is tied to the base rate set by the Bank of England.

It is really a discount mortgage, see above, provided in a different format. The rate you pay is given as a percentage margin that can be above or even below the Bank of England base rate and this margin is usually fixed for a period, anything from 6 months to five years.

At the end of the tracker rate period you will revert to the standard variable rate or another rate that that will last for the remainder of the mortgage term.

Usually there will be a penalty charge covering the tracker rate period during which you will pay a charge for redeeming the loan.

There are some tracker rate deals without redemption penalties.

At the end of a tracker rate term, assuming there is no tie in period or penalty for going elsewhere it may be beneficial to re-mortgage to another lender.