While everyone would like to know what the tracker mortgage rates are going to be, myself included, I can’t say that I know what they’ll be with 100%, but there are some things you can look at to get clues about where they might go. The rise and fall of those rates is what makes the tracker mortgage such a good and possibly bad option at the same time.
Making an educated guess or prediction about the rates of tracker mortgages is something we can do and their are quite a few people who have historically been very good at figuring out where the rates are going. One of the biggest things connected to the Bank of England’s base rate is the current condition of the economy. The stronger the economy is the higher the base rate will be. The same general rule applies on the flip side. If the economy is doing poorly, then lowering the base rate to help stimulate home purchases, which people will get a tracker mortgage for, is a great way to get the economy moving again.
One person you can always talk to to see what insight they have into the BoE’s base rate and where it’s going is a mortgage lender or broker. They spend a lot of time tracking trends and looking at historical data to better predict what might happen. They also have access to numerous other people in the same field that can also offer insight into tracker mortgage rates.
Unfortunately, like most things in life, nothing is certain. If your ability to afford the mortgage hinges completely on the base rate staying very low and not raise at all over the course of your mortgage then you might have to take a step back and reevaluate your decision. Not necessarily on if you should buy a house or not, but more so on if a tracker mortgage is right for you. Your mortgage broker might be able to suggest some other mortgage types that are a better fit for your particular situation.
Here is one example to prove just how much your payment can vary by only a 4% change in the base rate. If you have a mortgage payment based on a $350,000 dollar loan with a 5% interest rate you’ have a payment in the area of $1,800 dollars a month. Now if the base rate increases over time and settles in at 9%, only 4% higher than when you originally took out the mortgage, your new mortgage payment based on that increased interest rate would be $2,800 dollars. Roughly a $1,000 dollar increase per month compared to before. Can you imagine if the base rate increased even more?
Posted in Basics Of Tracker Mortgages, Tracker Mortgage.
Tagged with base rate, best tracker mortgage, best tracker mortgages, economy, interest rate, mortgage, predictions, Tracker Mortgage, tracker mortgage rates, Tracker Mortgages.
By Bill
– March 16, 2010
The basic definition of a tracker mortgage is actually quite simple. A tracker mortgage is a mortgage type where the interest rate is based on the Bank of England’s base rate. This is considered a variable rate mortgage as opposed to a fixed rate because the rate various in conjunction with the base rate.
What’s even more interesting is how popular this type of mortgage is. Roughly 20% of all mortgages are some form of a variable rate mortgage.
Obviously the best time to have this type of mortgage is when tracker mortgage rates are low. The lower the interest rate is the lower your payment will be and over time the lower total amount of interest you’ll have to pay. While a small increase in the interest rate doesn’t seem like a big deal it can be depending on your mortgage size. A small increase in the interest rate can really increase the payment if you have a larger mortgage.
On the flip side of a low base rate which translates into one of the best tracker mortgages, having a high interest rate can make a home that was previously affordable completely unmanagable. Let’s look at an example. If you get your tracker mortgage with an interest rate of 5% and your loan amount if $350,000 dollars you’d have a mortgage payment of approximately $1,800 dollars. Now if the Bank of England’s base rate changes and your new interest rate is 9%, you’d be looking at a monthly mortgage payment of $2,800 dollars. That’s $1,000 more per month you’d have to pay. Luckily most mortgages have a clause that states the interest rate can only go up so high before it stops rising. This is referred to as a cap.
Posted in Basics Of Tracker Mortgages, Tracker Mortgage.
Tagged with base rate, basics, best tracker mortgage, best tracker mortgages, interest rate, mortgage options, Tracker Mortgage, tracker mortgage rates, Tracker Mortgages.
By Bill
– March 16, 2010
Tracker mortgages follow the base interest rate of the Bank of England in the UK. How that works is simple, if the rate at the bank increases or decreases the same fluctuation is passed along to your mortgage interest rate. For example if you had a tracker mortgage that was at 5% and the Bank of England’s rate dropped to 4%, your mortgage would now have a 4% interest rate without refinancing. It’s more of less the opposite of a fixed rate mortgage that is not dependant on the current market rate.
Of all the available mortgages currently available to buyers, the tracker mortgage is one of the most popular based solely on the non-fixed interest rate. People hope that over the course of their mortgage, the base rate will fall, thus giving them a lower payment and also saving them a lot of money on interest. If the rate changes at the bank it will usually take effect on your mortgage within a 30 day period from that time. You also run the risk however of having the interest rate increase.
The other mortgage type that tracker mortgages are most often compared to is the discount mortgage. The discount mortgage works in the exact same way as the tracker except that it’s tied to the lender standard variable rate which most time is slightly higher so the advantage still falls on the side of the tracker mortgage. The disadvantage still applies to both mortgages in that if the interest rate climbs, so does your payment
Even within the tracker mortgage there are some variations to be aware of. The two big variations are in the base rate and how long the rate fluctuates before returning to the original rate at the time the mortgage was taken out. Talk with your lender to find out exactly which is best for you.
With any mortgage it’s very wise to get yourself educated and to not rush into signing anything. Tracker mortgages however are typically the best option for buyers.
Posted in Basics Of Tracker Mortgages, Tracker Mortgage.
Tagged with basic, best tracker mortgage, best tracker mortgages, interest rates, lifetime tracker mortgage, mortgages 101, Tracker Mortgage, tracker mortgage rates, Tracker Mortgages, what is a tracker mortgage.
By Bill
– March 10, 2010
One person you can always talk to to see what insight they have into the BoE’s base rate and where it’s going is a mortgage lender or broker. They spend a lot of time tracking trends and looking at historical data to better predict what might happen. They also have access to numerous other people in the same field that can also offer insight into tracker mortgage rates.