Tracker mortgage
A tracker mortgage follows the Bank of England base rate. This means your interest rate could go up or down during your initial term. Discover the potential benefits and considerations and see if a tracker rate mortgage could be right for you.
Apply for a tracker mortgage Calculator opens in same tabWhy get a tracker mortgage?
Things to consider
Monthly payments could go up
If the Bank of England base rate increases, your repayments will also go up. We’ll let you know before we increase your payments, but this could make it harder to budget each month. Try to factor this in when working out how much you could afford to borrow.
Risk of uncertainty
The base rate is regularly reviewed by the Bank of England, but we won’t know about any changes until they are announced. This could lead to some uncertainty about whether your rate is going to go up or down in the next few months.
Some lenders might have collars on low rates
A “collar” or “floor” stops your tracker mortgage rate dropping too low if the base rate drops below a certain point. This means you may not benefit fully from rate cuts if your deal has a collar.
Example
- You take out a tracker mortgage at base rate +1%.
- The base rate is 5%, so you pay 6%.
If the base rate drops to 2%:
- without a collar, your rate would fall to 3%
- with a 3.5% collar, your rate would only drop to 3.5% - not 3%.
At Lloyds, we don’t put collars on our tracker mortgages, so you’ll always take full advantage of rate drops. But other lenders might, so always check before you apply.
What happens when my tracker mortgage ends?
Once the term on your tracker mortgage ends, you’ll move on to your lender’s standard variable rate.
A standard variable rate, or SVR, is often higher than a tracker mortgage rate. This means your mortgage repayments are likely to increase. On an SVR, your mortgage rate could also go up or down.
If you don’t want to go onto an SVR, you might be able to switch to a new deal. This could be a new tracker mortgage or a fixed rate mortgage. Another option is to remortgage to a new lender.
Ready to apply for a tracker mortgage?
See how much you could borrow
Use the Lloyds mortgage calculator to get an idea of how much you could borrow with a tracker mortgage. Compare term lengths and work out what your repayments might be.
You could lose your home if you don’t keep up your mortgage repayments
Let’s take a closer look
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The length of your tracker mortgage will depend on the deal you’re offered. For example, you might choose to get a 2 year tracker rate mortgage with us. This means you would be tied into the deal for 2 years. Once this term ends, you’ll move on to a standard variable rate, unless you decide to switch to a new deal.
Most lenders offer tracker mortgage deals that last from 2 to 5 years. Though some might also offer longer terms, such as a lifetime tracker mortgage.
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Tracker rate mortgages are usually agreed for a set period. So, if you want to switch to another deal, or pay off your mortgage early, you may be charged an early repayment charge. Some lenders do let you switch from a tracker rate mortgage to a fixed rate without paying an early repayment charge – always check the details of your deal before applying.
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Yes, you can usually make overpayments on your tracker mortgage. Check your mortgage terms to see if there are any limits to how much you can overpay, or any extra charges. If you’re interested in overpaying on your mortgage you have with us, visit Home Wise for more information.
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Whether a tracker or fixed rate mortgage is right for you will depend on your circumstances. A fixed rate mortgage means you’ll get a fixed interest rate for a set period. This could help you budget for your monthly repayments, as you’ll know exactly how much you’re paying each month.
A tracker rate mortgage has a variable interest rate that tracks the Bank of England Base Rate. This means the interest on your repayments could fluctuate in line with any changes to the Base Rate. You usually won’t know how much you’ll be paying each month until the Bank of England announces any change.
Some lenders might let you move from a tracker mortgage to a fixed rate without paying an early repayment charge. This could help if you change your mind or want to fix when the rate changes.
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A tracker mortgage is a type of variable rate mortgage that tracks the Bank of England base rate. You can also get put on a standard variable rate. This is set by your lender and often influenced by the base rate, but it doesn’t directly track it. Standard variable rates also tend to be higher than a tracker rate.
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Yes, you might be able to get a buy to let tracker mortgage with us. This means your repayments could increase or decrease in line with the base rate. We also offer fixed rate buy to let mortgages.
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