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What is a Tracker Mortgage?
This type of mortgage similar to a discount mortgage. Regarding a discount mortgage, the lender gives a percentage off their SVP (Standard Variable Rate). The tracker mortgage simply follows the Bank Rate plus x%
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For example, Bank of Englands rate is set at 5.5%, you may find a tracker mortgage based upon the Bank Rate +1% = 6.5%.
Discounted Tracker Mortgage
A variation of the above is a discounted tracker mortgage. The discount is applied for a fixed period ie 6 months at the Bank Rate -0.8%. When the reduced rate holiday has completed the rate would then flip back to 5.5% + 1% = 6.5%. Hence the first 6 months worth of payments on the discounted tracker mortgage would be at 4.7% (Bank Rate 5.5% - 0.8% discount)
Lifetime Tracker Mortgages
Lifetime Tracker mortgages are set up to track the Bank Rate for the entire period of the mortgage term by a guaranteed maximum percentage. These types of mortgages usually have a lower fees involved and don't incurr any early redemption charges (ERC's).
Tracker Mortgages - Advantages and Disadvantages
Tracker mortgages restric the lender from being able to influence the rate once its initial margin is applied.
Rates fluctuate directly related to the Bank Rate unlike being linked to the mortgage lender's very own SVR, (which they can adjust accordingly for commercial purposes).
Early Redemption Charges will usually only apply during the initial discounted period of the discounted tracker mortgage.
Visit www.aph.org.uk and let us find you a cheaper tracker mortgage deal. | 
