What is a tracker remortgage package?
A tracker remortgage is a mortgage where the rate of interest is a predetermined percent over the Bank of England's base rate, which is currently at an historic low of 0.5 per cent. The tracker rate fluctuates with changes to the BOE base rate, which is currently predicted to remain at it's present level to at least the end of 2012.
The Bank of England base rate is determined each month by the state and whatever rate is decided upon, ultimately affects a borrower's rate if they are on a lender's tracker remortgage. Generally a tracker will be at a specified percentage above the base rate, so if the base rate is 2 per cent and the lender's tracker is set at base rate plus 1 per cent, then the interest charged will be 3 per cent.
Some re-mortgage offers can provide a rate which monitors the base rate for a predetermined period of time, perhaps for example 2 years, after which the mortgage will revert to the lender’s standard variable rate. When comparing remortgage deals it is important to bare these things in mind, as calculations should include exactly what repayments are likely to be once the initial rate has finished.
For those considering whether to move to a tracker remortgage, while the BOE base rate stays at 0.5 per cent there should be nothing to lose. However, as a tracker rate depends on the base rate it will be difficult to predict the likely future effect a tracker may have on a borrower's finances
