A tracker mortgage is very much like any other mortgage in most ways. However, whereas the standard variable rate mortgage interest rate is set by the lender, a tracker mortgage has its interest rate set with reference to in most cases, the Bank of England’s Base Rate.

The Bank of England reviews its base rate every month and sets the rate as a means of setting the cost of money banks ‘buy in’. As the rate rises lending rates are likely to follow. With a tracker mortgage the mortgage interest rate specifically tracks indices like the Bank of England Base Rate.

If the Tracker Mortgage interest rate is set at 2% above Bank of England Base Rate then if the Base Rate were to rise from 0.5% to say 1%, then the mortgage interest rate would rise accordingly from 2.5% to 3%.

At the time of writing (November 2015) the Bank of England Base Rate remains at an historically low 0.5%. Base Rates can rise for many reasons but generally, as the economy grows and inflationary pressures are felt in the general economy, the Bank of England will aim to gradually increase their Base Rate to control inflation and protect the value of the currency.

It’s worth noting that in most scenarios, a bank’s standard variable rate will probably rise and fall as the Bank of England’s Base Rate rises and falls anyway. But a Tracker Mortgage makes this link explicit.

For more information about tracker mortgages contact us or speak to a mortgage adviser on 01628 507477.

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Your home may be repossessed if you do not keep up repayments on your mortgage.

There will be no fee for Mortgage Advice. There may be a fee for arranging a mortgage. The precise amount will depend upon your circumstances, but we estimate it to be between £399 and £599.

Mortgage Required Ltd, Finance House, 5 Bath Road, Maidenhead, SL6 4AQ is authorised and regulated by the Financial Conduct Authority reference 573718 at www.fca.org.uk.

The Financial Ombudsman Service is an agency for arbitrating on unresolved complaints between regulated firms and their clients. More detail can be found on their website: www.financial-ombudsman.org.uk