With so many variations of mortgages on the market it can be daunting for first time buyers and could mean they choose a mortgage which isn’t suited for them.
A tracker mortgage is worthwhile inquiring about with the current market conditions. A tracker mortgage is a variable rate mortgage; the interest on the mortgage follows the Bank of England base rate. More often than not interest rates are set higher than the base rate. With interest rates set at 1% at the moment, you would then pay a percentage above this rate.
While interest rates are very low at the moment you can find mortgages with low monthly payments or overpay helping you to clear your mortgage sooner. Tracker mortgages are very popular at the moment and while there are good deals to find they do however attract high arrangement fees. The other disadvantage is mortgage lenders often have a ‘collar’ in the contract which states if the base rate falls below a certain percentage they reserve the right to stop tracking the base rate.
If you can find a good rate as well as afford the deposit, which has become the biggest hurdle for borrowers, do calculate how competitive the rate is when you compare the arrangement fee to other deals over the term. Finally think about how the market is likely to be when the term ends. You could finish your mortgage deal and be looking for a deal when rates have returned to 2007 levels of 6-7%.
Before going with the mortgage go through your options. It may be of more benefit to go with a lenders standard variable rate which and then going with a fixed rate deal when interest rates start to rise again.
While the purpose of this article was to give you more information about tracker mortgages to help you with your mortgage choice it is best if you seek professional advice. Mortgage brokers can provide you with expert advice and often for free as part of their service. They can explain the different mortgage products on offer as well as advise you on a type to suit your circumstances.
