Bank Base Rate Trackers

The Basics

Increasingly popular, base rate tracker mortgages, unlike ordinary standard variable rate mortgages 'track' or follow the bank base rate set by the Bank of England. This means that all bank rates cuts are automatically passed on to the borrower. The differential between base and pay rates remains constant for an agreed period and is normally far smaller than the margin on an ordinary variable rate.

Advantages

Generally, the rate charged will be lower than the variable rate applicable under a standard mortgage. Any changes in the Bank of England base rate will be directly reflected in the monthly mortgage payments.

Disadvantages

As mentioned above, any change in bank rates will be directly reflected in the monthly mortgage repayment so this type of mortgage provides no protection against any upward movement in interest rates (in contrast to fixed rate mortgages for example).