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Tracker Rate Mortgage

Prior to the recession in 2008 Tracker rate mortgages were very popular, because the property market was buzzing, and nobody could see this coming to an end. Once interest rates had started to rise during the recession most clients then began to look at other options.

Tracker rate mortgage plans are linked either to the BOE ( Bank of England base rate) or LIBOR ( London interbank offered rate). The BOE rate is reviewed by the Bank each month and would generally reflect how well the economy is performing. With LIBOR this rate is reviewed every three months and is set by the major banks who agree this themselves.

In the current mortgage market with the BOE rate being .75%, the long term forecast is that interest rates will have to rise over a period of time making the Tracker Plans unattractive and most clients are moving to long term fixed rate plans which provide the level of security that client’s are looking for.

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More About Tracker Rate Mortgages

The more popular base to link to would always be the BOE base rate as this has always been marginally less expensive than LIBOR and history would indicate that it would be less volatile

The current BOE rate today in August 2018 0.75%, which it has remained at for nearly 2 years, whilst LIBOR is around 0.9%. The margin over the base rate is the key to how competitive the product is. Linked to the lenders arrangement fee, which although added to the loan, does underpin the rate of interest charged. Borrowers should always compare the product with a large fee that appears to be the most competitive against one that may not have the same headline rate. However, what impact does the fee have on the margin being charged? In most cases there is very little difference to choose between the two products.

Lenders, as you can imagine, would prefer to use LIBOR as the base as they will make more money from the product. To add to the attraction, LIBOR is reviewed quarterly, which makes changes to client’s repayments less onerous than BOE, which is reviewed monthly.

If you would like to discuss any of the plans that are available to you today, please call Michael J Alexander on 03452 605506. We are Independent Mortgage Advisers with over 40 years of experience in Financial Services, and have access to the whole of the market and to all of the mortgage clubs who offer exclusive products only available via intermediaries.

 

The overall cost for comparison is 5% APR. The actual rate available will depend on your circumstances. Ask for a personalised illustration.