Tracker or Fixed Rate Mortgages: Which Is Better?

A Guide to Making the Right Decision for You

Deciding whether to get a tracker or fixed rate mortgage can be confusing. This guide will help you understand the difference between the two and make the right decision for you.

What is a tracker mortgage?

A tracker mortgage is a mortgage product where the interest rate is directly linked to a specific benchmark rate, such as the Bank of England Base Rate. The interest rate on a tracker mortgage will therefore change in line with any changes to the Bank Of England. This makes tracker mortgages a very popular choice for clients that have a higher risk appetite and anticipate the base rate will drop.

What is a fixed rate mortgage?

A fixed rate mortgage is a type of mortgage where the interest rate is set for a fixed period of time (usually 2 or 5 years). This means the monthly payments will stay the same each month, making it easier to budget for homeowners. They can be used for both home purchases and refinancing.

Factors to consider when choosing a mortgage

There are a lot of factors to consider when choosing a mortgage. One of the most important is the overall deal. You want to make sure you are getting the best interest rate possible BUT also considering any associate fees and whether they are added on to your mortgage (if so these will bare interest). Another factor to consider is the term of the mortgage. You want to make sure you are comfortable with the length of the mortgage alongside, making sure you can afford the monthly payments.

The benefits of a tracker mortgage

There are many benefits to choosing a tracker mortgage. The first and most obvious benefit is that your interest rate will be tied to the Bank of England base rate, meaning that your monthly mortgage payments can reduce in the future pending the base rate lowering. This can be a great way to benefit from a lower interest rate which in turn would keep a lower monthly payment.

Finally, tracker mortgages are often much simpler to understand than other types of mortgages. This can be helpful if you are not familiar with the terminology used in the mortgage industry.

The benefits of a fixed rate mortgage

A fixed rate mortgage can provide stability and predictability in your monthly housing costs. You’ll know exactly what your mortgage payment will be for the specified years, which can be helpful in budgeting and planning for the future. Additionally, a fixed rate mortgage may be a good choice if you’re concerned about potential interest rate increases.

How to decide which mortgage is right for you

There are many different types of mortgages available on the market, and it can be difficult to decide which one is right for you. Your choice will depend on a number of factors, including how much you can afford to borrow, the interest rate you are offered and the length of the mortgage.

The most important thing is to speak with an adviser. There are many comparison sites that unfortunately do not give advice. They often rate mortgage products in lowest to highest interest rates. Unfortunately, this does not mean you are saving money. When considering a tracker mortgage there are a number of scenarios an adviser will go over with you to ensure that you fully understand all risks attached.

When choosing a mortgage, it is important to consider the following:

How much can you afford to borrow?

What is the interest rate?

What is the length of the mortgage?

Are there any fees or charges?

What are the monthly repayments?

It is also important to read the small print, as some mortgages come with hidden costs. So, make sure you know what you are signing up for before you commit to anything.

Expert Mortgage Brokers Barnsley

At Legacy Financial our brokers have ample years of experience in both the banking industry, Estate Agency and independent brokerages. We can offer professional and bespoke advice tailored to your personal circumstances.

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