Tracker Mortgages
Stay Flexible with Tracker Mortgages
Looking for a mortgage that adapts to market changes? Tracker mortgages offer interest rates that move in line with the Bank of England Base Rate, providing the potential for lower payments when rates drop. Whether you’re a first-time buyer or buy to let investor, a tracker mortgage could be right for you.
What is a Tracker Mortgage?
A tracker mortgage is a type of variable rate mortgage where the interest rate follows, or "tracks," the Bank of England base rate. This means your repayments can rise or fall depending on changes to the base rate, offering opportunities for savings when rates are low.
Key Features of a Tracker Mortgage:
Base Rate Linked: Interest rate directly tied to the Bank of England base rate.
Fluctuating Payments: Monthly payments can increase or decrease with changes in the base rate.
No Fixed Rate: Payments are not locked, offering potential savings when rates are low.
Transparent Rate Structure: You can clearly see how changes in the base rate impact your payments.
Flexible Terms: Many lenders offer options like lifetime or term trackers.
Potential for Early Exit: Some tracker mortgages allow you to switch to a different mortgage type without significant penalties.
Tracker mortgages are a popular choice for those who can handle fluctuating payments and want to take advantage of market conditions.
What is the Bank of England Base Rate?
The Bank of England Base Rate is the interest rate the Bank of England charges other banks and lenders when they borrow money. It serves as a benchmark for tracker mortgages, influencing how much interest you pay. Changes to the base rate directly affect your tracker mortgage payments, making it essential to stay informed about rate changes.
For example, if your tracker mortgage is 0.28% higher than the base rate, and the base rate drops from 4.5% to 4%, your mortgage rate will decrease from 4.78% to 4.28%. Conversely, if the base rate increases, your mortgage payments will rise accordingly.
Types of Tracker Mortgages
Tracker mortgages come in various forms to cater to different financial needs:
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Lifetime Trackers: These mortgages track the base rate for the entire loan term, offering long-term flexibility.
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Term Trackers: Tracks the base rate for a fixed period (e.g., 2 or 5 years), after which it may revert to the lender’s standard variable rate. This is the most popular choice.
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Stepped Trackers: Starts with a lower rate and gradually increases, providing an introductory period of reduced payments.
Why Use a Mortgage Broker for Your Tracker Mortgage?
6 Benefits of Using a Mortgage Broker
Expert Guidance
Mortgage brokers specialize in navigating the mortgage process, helping first-time buyers understand options, terms, and requirements without jargon. Their expertise makes the journey smoother and less stressful.
Help with Complex Applications
If you have unique circumstances, such as being self-employed or having a low credit score, a broker can identify lenders with flexible criteria and advocate on your behalf.
Access to More Lenders
Unlike banks, brokers have access to a wide range of lenders and exclusive deals. This increases the likelihood of finding a mortgage tailored to your specific needs and circumstances.
Personalized Advice
Brokers offer tailored recommendations based on your financial situation, long-term goals, and preferences, ensuring you choose the best mortgage for your needs.
Save Time and Effort
A broker does the heavy lifting for you, comparing mortgage products, handling paperwork, and managing lender communication, saving you time and reducing hassle.
Better Mortgage Rates
Mortgage brokers often have access to exclusive rates and deals that aren’t available directly to the public, helping you secure a more affordable mortgage.
Document Checklist for Tracker Mortgage
1. Proof of Identity
Mortgage lenders need to verify your identity. Ensure you have one of the following:
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Passport (valid and up to date)
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Driving license (with current address)
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National ID card (if applicable)
2. Proof of Address
Lenders will also need to confirm your current residence. Provide at least two of the following documents:
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Utility bills (dated within the last 3 months)
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Council tax statement
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Recent bank or credit card statement
3. Proof of Income
Your income demonstrates your ability to afford mortgage repayments. Requirements vary depending on your employment type:
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Employed Applicants:
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Last 3 months’ payslips
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Latest P60
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Employment contract (if recently started a new job)
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Self-Employed Applicants:
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Last 2-3 years’ tax returns (SA302 forms)
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Recent bank statements showing income deposits
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Accountant-prepared financial statements
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4. Bank Statements
Provide the last 3-6 months of bank statements to give lenders insight into your spending habits, income, and savings. These statements should:
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Show your name and account details
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Highlight consistent income deposits
5. Proof of Deposit
Lenders need evidence of your mortgage deposit, whether it’s savings, a gift, or a bonus. Acceptable proof includes:
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Savings and/or investment account statements
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Lifetime ISA statement (if applicable)
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Gift letter (if deposit is gifted)
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Bonus payment slips
6. Credit History
Lenders will check your credit score and history to assess your financial responsibility.
7. Additional Documents
Depending on your circumstances, lenders might ask for:
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Proof of additional income (e.g., rental income, dividends)
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Debt repayment plans (if applicable)
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ID verification for anyone contributing to your deposit
8. Conveyancer Details
You will need to provide your conveyancer's detail when applying a mortgage. Find your conveyancer here.
