Getting the right mortgage deal could save you hundreds of pounds every month, but there are many factors to think about when shopping around.

It’s not just about finding the lowest rate and sticking with it.

In this article we’ll look into what factors you should potentially consider, and whether a tracker mortgage is the right choice for you.

What exactly is a tracker mortgage?

A tracker mortgage is a type of variable rate mortgage. What sets them apart from other variable rate mortgages is that they follow - or track - the movements of another rate. More often than not, the rate that is tracked is the Bank of England Base Rate.

A tracker mortgage doesn’t match the rate it tracks, but sits at a margin above that rate. For example, an introductory offer may be the Base Rate plus 1%. So, with the Base Rate currently sitting at 0.25%, this would put you on a rate of 1.25%.

What is the UK Base Rate, and is it likely to change?

The UK Base Rate is the interest rate that the Bank of England charges Banks for secured overnight lending. It is currently 0.25% - a historic low. For those currently on tracker mortgages, it has meant that payments have sometimes been cheaper than in recent times.

The National Institute of Economic and Social Research have predicted that the UK economy could bounce back in 2018, potentially leading to a rise in interest rates. If rates do increase, it could mean that mortgage payments may increase too.

What are the benefits and pitfalls of a tracker mortgage?

So, as the tracker rate follows another rate, it could rise and fall in accordance to the rate it is following.

If the rate falls, you may benefit from lower payments, but if the rate being tracked goes up, you could suffer from higher payments.

Introductory tracker rates could be amongst some of the very lowest mortgage interest rates available - this attracts many people who are looking for low rates. However, as with all variable rates, there is no security on this low rate. If you’re likely to spend sleepless nights worrying about changes in interest rates, you could possibly consider for the potential security of a fixed-rate mortgage instead.

What’s more, introductory tracker mortgages can come with an Early Repayment Charge, which you mayhave to cough up for if you remortgage or repay your mortgage within this introductory period.

However, tracker rate mortgages may let you make overpayments without charging this fee - you could overpay up to 10% of the outstanding mortgage balance per year. However, you may need to check your deal to be sure. This may be highly beneficial if you want to pay your mortgage off faster.

What other fees should I be aware of?

As with all mortgages, there may be fees you should potentially take into consideration when looking for the right deal. This is why the lowest rate isn’t always the best choice. These fees include an arrangement fee, an Early Repayment Charge, and exit fees.

You could also consider the loan to value of your mortgage. You may potentially think about doing this once you have figured out how much of a deposit you can put down for your loan.

Advantages of a tracker mortgage

If interest rates drop, your payments may also do so

Introductory tracker rates can be among the lowest variable interest rates on offer

Arrangement fees for tracker mortgages could to be lower than for fixed rates

Early Repayment Charges can be less expensive than for fixed rates

Some lenders may offer a ‘switch and fix’ feature, allowing you to change to a fixed mortgage if rates rise, without paying an Early Repayment Charge

Disadvantages of a tracker mortgage

If the mortgage has a ‘collar rate’ you may not benefit it rates fall below a certain level

If rates go up, your payments could go up. This can possibly mean a substantial increase in your monthly outgoings, which you may not have budgeted for

If you want to repay your mortgage early, you may have to pay the Early Repayment Charge

When your introductory rate period ends, you may go onto another tracker rate, or your lender’s SVR. This could mean a sharp jump in your monthly payments


Eddison Wells is a mortgage brokerage - with a wealth of knowledge, their team are able to advise on a comprehensive range of financial products.

Providing the highest quality service at the most affordable price is a prerequisite and a firm ethos.

If you’re thinking of taking out a tracker mortgage, Eddison Wells Mortgage Brokers are free to speak on any business day - call now on 0800 808 9981