Tracker mortgages are mortgage deals with a variable interest rate which tracks the Bank of England base rate. The interest paid will remain at a set percentage above or below the base rate for the length of the offer.

According to estimates by the Council of Mortgage Lenders, approximately one in five of all mortgages are tracker mortgages. If you think a tracker mortgage might be the right kind of mortgage deal for you, read on to find out our top 5 tips for trackers.

Can I get a sub-base rate tracker mortgage?

In the past, it has been possible to get a tracker mortgage with an interest rate set below the base rate, meaning that people who took out tracker mortgage deals set at 0.5 per cent below base rate found themselves paying zero interest on their mortgage when the base rate fell to 0.5 per cent. However, following the dramatic base rate cuts in 2009, sub-base rate trackers were removed from the market.

When is the best time to have a tracker mortgage?

It is best to have a tracker mortgage during the times when the base rate is very low, because you will be paying lower interest on your borrowing as a result. You need to consider the benefit of paying low interest at these times against the risk of being subject to increased interest payments when the base rate increases. The larger your mortgage is, the larger the risk.

When is it a bad time to have a tracker mortgage?

Depending on your deal, a tracker can be a good mortgage at any time, depending on the particular mortgage deal you have entered, although of course you benefit more from a tracker when base rates are low. However, if your mortgage deal specifies an interest rate which is fairly high above the base rate, you may find yourself in a worse position when base rates are high, compared to if you had chosen a fixed rate mortgage.

Can I predict the base rate?

It is impossible for anyone to know for sure what will happen to the Bank of England (BoE) base rate in the future. Each month, the government’s monetary policy committee reviews the base rate and decides whether to keep it the same, increase it or decrease it. Their decision will be based on a variety of factors connected to issues such as government policy and the current state of the economy. However, there are plenty of people in the world of finance willing to make informed predictions about base rate fluctuation so reading up on the economy can give you an edge on understanding what is likely to happen, a mortgage advisor will probably also be able to make things a lot clearer.

Is there a less risky kind of tracker mortgage?

If you like the idea of a tracker but are worried about a higher base rate making payments harder to cope with, you may be able to find a mortgage deal with a ‘drop lock’ option. This allows you to switch to a fixed-rate mortgage if you want to, and normally with this option there are no charges incurred for doing so.